Downstream steel producers continue to rail against ‘unfair pricing’

Loud and on-going complaints
from SA’s ‘downstream’ steel
industry members against
“predatory pricing” by the
country’s monopolistic steel
producer, ArcelorMittal SA
(Amsa), have met with support
from a November 16 finding by
the Competition Tribunal.
In this, the tribunal
confirmed the original
settlement agreement with
Amsa, but with amendments,
as an order.
This referred to Amsa’s
agreement in August with the
Competition Commission (CC)
where the steelmaker admitted
it had engaged in price fixing
and market allocation in the
long steel cartel and price fixing
in the scrap metal cartel. For
this, it was hit with a
R1.5-billion penalty – the
largest imposed on a single
firm in the 17-year history of SA
competition law.
Amsa also agreed to a pricing
remedy – limiting for five years
its earnings before interest and
tax (EBIT) margin to a cap
of 10% for flat steel products
sold in SA, and committing to
a US$4.6-billion (R65.09bn)
capital expenditure over the
same period.
The amendments inserted
by the Tribunal included a
new undertaking. In this,
Amsa has agreed to be “open
and transparent” in its future
dealings with government and
industry stakeholders.
This, said the CC, covered
three complaints against
Amsa’s involvement in collusion
in the flat steel, long steel and
scrap metal market and one
related to excessive pricing in
the flat steel markets.
But Gerhard Papenfus, CE
of the National Employers'
Association of SA (Neasa),
and speaking on behalf of SA’s
downstream steel industry,
was adamant that this latest
Tribunal order didn’t solve the
overall problem with Amsa.
He slammed SA’s only steel
producer for still “really having
its cake and eating it”.
Commenting on Amsa’s
agreement to a 10% cap
on profits of flat products,
Papenfus said that “the
elephant in the room” was
Amsa’s old technology and
expensive steel making. “And
being allowed to make 10%
on top of this,” he added, “is
rewarding them for their poor
contribution towards the steel
downstream.”
He also noted that the
10% cap was limited to five
years. “The probability of the
over-supply situation in the
world being rectified within
five years is very low,” said
Papenfus. “This therefore
constitutes no sacrifice from
Amsa.”
And, looking at the pricing
basket, he was also cynical.
“How Amsa convinced
government that the Chinese
price be excluded from the
basket,” he said, “is a mystery.
Chinese production accounts
for 50% of world production
and to ignore this reality only
suits Amsa and nobody else.”
Papenfus urged trade and
industry minister, Dr Rob
Davies, to intervene urgently
on the issue of the protectionist
measures favouring Amsa –
both the 10% customs duties
already introduced as well as
the further 30% safeguard
duties now being requested.