Itac investigates alleged dumping of steel products from Asia

SA’s tariff regulator has opened an investigation into the possible dumping of steel from China, Thailand and Japan to determine whether the Southern African Customs Union (Sacu) is experiencing material injury.

The International Trade Administration Commission of SA (Itac) investigation, which covers the period from April 1 2022 to March 30, also seeks to determine if there is a causal link between the alleged dumped imports and the material injury experienced by the Sacu’s industry.

The application to open the investigation was brought by ArcelorMittal Rail and Structures (Amras), which is a wholly owned subsidiary of steel producer ArcelorMittal SA (Amsa) and Columbus Stainless. The two companies constitute 100% of the domestic production of Usections, I-sections and H-sections of iron or nonalloy steel (excluding H-sections of a height greater than 200mm) and equal angles of iron or nonalloy steel.

In a notice published on Friday, Itac said the two applicants presented evidence that showed there is a “a prima facie case to enable the commission to arrive at a reasonable conclusion that an investigation should be initiated based on dumping, material injury and causality”.

“The applicant submitted prima facie evidence to show price suppression and depression. The applicant’s information also indicated declines in sales volumes, output, productivity, capacity utilisation, profits, cash flow, market share, employment and return on investment,” Itac said.

“The applicant submitted information alleging that there is freely disposable capacity or an imminent substantial increase in steel capacity of the exporters in the [People’s Republic of China], Japan and Taiwan, a significant increase of allegedly dumped imports into the SACU market, which indicates the likelihood of substantially increased importation and that the subject product is entering the SACU market at prices that will have a significant depressing or suppressing effect on SACU prices and are likely to increase demand for further imports.”

Data from the Southern African Iron and Steel Institute shows imports of hot-rolled coil to SA from the three Asian countries increased more than 120% over the three years under investigation, from 160,000 tonnes to 355,000 tonnes. This amounted to 76% of all hotrolled coil imports to SA.

“Exports of surplus supply, mainly from the overcapacitated countries in the East including China caused a flurry of trade measures introduced by importing regions. Instead of bringing production in line with demand, the gap between demand and supply is widened and the surplus sold in international markets at conditions that accelerate the decline of prices (for example, at prices lower than market value or dumping) and negatively influences the financial health of all steel producers,” said SAISI secretary-general Charles Dednam.

Amsa received a shot in the arm earlier this year when the government imposed a 9% duty on imports of hot-rolled steel products. Improvements in Transnet’s performance and the easing of load-shedding helped the company to avert a jobs crisis at some of its operating plants, saving 3,500 internal jobs and as many as 80,000 jobs in the value chain.

A Molotov cocktail of subdued demand, historically low prices putting margins under pressure and blast furnace interruptions gripped Amsa in the half year to end-June.

SA’s economic activity continued to stagnate in the first quarter. In the period, local primary steel exports increased by 13%, reflective of the 14% increase in crude steel production, all of which could not be consumed domestically given weak demand.

“Tariffs have the effect of raising prices and that obviously is good for producers. But it is important to note that it is unusual to provide protection so far upstream. Usually when protection in an industry is provided it’s given at the point where the consumer interacts with the product,” said XA Global Trade Advisors CEO Donald Mackay.

“We shouldn’t assume that all imports are dumped or that all imports are unfair trade.”