In the wake of an application lodged with the International Trade Administration Commission of South Africa (Itac) for the imposition of anti-dumping duties on cheap Chinese steel imports, ArcelorMittal South Africa has announced plans to shut two mills and said it was reviewing operations at its largest plant.
The company said in a statement that trading conditions had continued to worsen since it started reviewing its long steel business in July, adding that higher South African import duties would only bring relief over the medium to long term.
South Africa last week imposed a 10% import tariff on steel, the maximum level allowed by the World Trade Organisation (WTO).
Chief economist of the Steel and Engineering Industries Federation of Southern Africa (Seifsa), Henk Langenhoven, said: “The basic steel producers are in such distress that short-term downscaling is unavoidable. Gearing ratios for basic steel producers worldwide have shot up since 2010, and South Africa is no exception. Several of the companies have stated that they cannot service their debt at the lower scale of production; they are simply not profitable, and cost cutting is inevitable in the short-term.”
He added that production costs in South Africa, for various reasons, were higher than the lowest cost quantile of Chinese producers. The domestic market for steel has contracted due to construction and mining activity slowing down.
According to Langenhoven, the auto sector in the country is faring better due to exports to the United States, but other steel exports (up to 50% of production) are suffering due to depressed world markets.
Two steel mills set to close as trading conditions worsen
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