Steel industry body warns against tariff protection 'panacea'

Tariff protection should
not be the only “tool” used
to protect South Africa’s
local steel industry from
cheap imports as this
then puts price pressures
on the local
downstream
producers.
“When
there is
pressure on
the primary
producers,
because of a
glut of global
steel and
resulting
cheaper
import
prices, the
industry’s
first response is always
to call for higher import
duties,” said Steel and
Engineering Industries
Federation of Southern
Africa (Seifsa) chief
economist, Henk
Langenhoven.
This however resulted
in a price increase for the
downstream producers
who were beneficiating the
raw steel, he pointed out,
commenting that import
tariff protection would
always have winners and
losers.
“It is important to
protect the local primary
producers
because, as
an economy,
we need to
retain the
skills and
capabilities
for local
production.
When the
global steel
glut dries
up, the
downstream
producers
will then
still pay a premium for
imported steel,” said
Langenhoven.
He suggested that the
steel sector was far more
diverse and that there were
more dynamics at play than
simply looking at raw steel
producers and downstream
producers as a whole. “It is
unproductive to look at the
overall sector and attempt
one-size-fits-all solutions
such as import duties,” he
said.
Instead, before decisions
are made about ensuring
the survival of the industry,
the “powers-that-be”
should fully analyse the
respective dynamics of
the sub-industries within
the steel industry. “This
will result in far more
sustainable solutions that
will revive the individual
sectors,” said Langenhoven.
For example, while
overall steel production
had dropped 30% over
the past nine years, there
were sub-sectors that
had actually seen a major
production growth due to
an increase in domestic
demand, he highlighted.
This includes a 56%
growth in demand for
locally produced machinery
and machine parts and a
73% rise in demand for
locally produced transport
equipment.
And, once the analysis
has been done and
individual industry
protection solutions are
devised, the sector as
a whole will eventually
recover.
“The analysis could
provide useful insights and
provide a more holistic
picture of which steel
sub-industry is exporting
to which country and
identify opportunities in
new export markets based
on price and product
competitiveness,”
Langenhoven
pointed out.
The data and
insights could
also highlight
opportunities
for the industry
sub-sectors to
regain a stronger
local share of the
market.
“Therefore,
instead of
merely seeking
import duties,
alternative
solutions could
be crafted
that could
improve the
competitiveness
of the sub-sector against
competing import and
export markets.”
Langenhoven said, for
example, that if operational
efficiencies were improved
– through modernisation
– products could be
produced at a lower cost
and therefore already be
more competitive on the
national, regional and
global trade platform.
INSERT & CAPTION
It is unproductive to
look at the overall
sector and attempt
one-size-fits-all
solutions such as
import duties.
– Henk Langenhoven