Important South African industry at risk written by Bianke Neethling

Rand York Castings applied to the International Trade Administration Commission (ITAC) to increase the rate of customs duty on steel shoulder couplers to help the local industry.

Steel shoulder couplers are pipe connectors used to join two sections of pipe securely in construction, mining, and industrial applications.

They are designed to handle high-pressure and load-bearing requirements, making them essential in industries like water infrastructure, fire protection, and underground mining.

However, local manufacturing of these products has come under severe pressure, as cheap imports from China and other Asian countries are making it difficult for local manufacturers to compete.

Therefore, Rand York Castings requested that import duties on these steel shoulder couplers be raised from 0% or 10% – depending on the current category – to the World Trade Organization bound rate of 15%.

In other words, if the current duty is 0%, they want it increased by 15 percentage points, and if the current duty is 10%, they want it increased by 5 percentage points.

Law firm Cliffe Dekker Hofmeyr’s Petr Erasmus and Savera Singh explained that the goal of this is to make imported couplers more expensive so that local manufacturers can compete more effectively.

Rand York Casting explained in its application that the downstream steel industry has been under considerable pressure for a protracted period of time.

This is predominantly due to the influx of low-priced imports from China and other Asian countries.

It said higher import duties would play a key role in improving the domestic industry’s price aggressiveness against the unyielding pressure from lower-priced imports.

“The applicant stated that this course of action would concurrently help safeguard the current employment levels in the industry, assist in creating an environment advantageous to job growth, and bolster investment in the reindustrialisation of plant and equipment,” the legal experts explained.

Rand York Casting said this should be done to prevent the local manufacturing industry from experiencing the same loss already seen in the grooved coupling sector within the South African Customs Union region.

This region comprises Botswana, Lesotho, Namibia, South Africa, and Eswatini, where import competition has disintegrated domestic manufacturing in the grooved coupling sector.

“The domestic industry was said to now have to contend with a similar threat in the shouldered coupling sector, as import volumes remain at insupportable proportions,” Erasmus and Singh said.

“The applicant argued that without swift and expeditious action to curb these imports, the domestic manufacturing industry may risk facing the same doom.”

Thousands of jobs on the line

Rand York Casting’s application comes when South Africa’s steel industry is already under significant threat.

This is because ArcelorMittal South Africa, the continent’s largest steel producer, has decided to wind down its long steel business in the country.

The company explained that challenges in the local steel industry have made keeping the business open unsustainable.

This is set to have devastating consequences for the local manufacturing industry, with thousands of job losses expected to follow.

ArcelorMittal said the final number of retrenchments is not yet certain, but it is envisaged that approximately 3,500 direct and indirect jobs may be affected.

However, Rand York Casting CEO Justin Corbett warned that the closure of this business is devastating to the local steel industry and the country as a whole.

He said that at least 100,000 jobs in South Africa are at risk in the medium term due to ArcelorMittal’s shutdown of its longs business.

“We expect in the short-term to lose an additional 50,000 jobs in South Africa and, in the medium-term, at least 100,000 jobs,” he said.

He explained that ArcelorMittal is the most complex steel maker in South Africa in terms of its capability.

As much as 32% of the steel produced in South Africa is unique to ArcelorMittal and is not made by other mills in the country.

“We’ve got some mills that are upscaling and upgrading their capability, but right now, companies in South Africa are going to be faced with broken supply chains and a very, very, very difficult situation in terms of continuity,” Corbett said.

This will have far-reaching consequences for other steel producers in South Africa and affect other industries.

For example, when it comes to the high-tech products required in the mining or automotive sectors, Corbett said ArcelorMittal is the only producer capable of making them.

This is why the job losses linked to ArcelorMittal’s wind-down are expected to be so high.

Corbett explained that he expects an immediate impact of between 30,000 and 50,000 job losses as various supply chains, subcategories, and divisions of the fabrication companies close down.

In the medium to long term, he expects Original Equipment Manufacturers to discontinue the manufacturing of a particular line.

Alternatively, the impact of the wind-down could be so dramatic that the local content will not be high enough, and companies will choose to relocate elsewhere.

“Collectively, you’re looking at a minimum of 100,000 people that are going to lose their jobs,” he warned.

In its latest results, ArcelorMittal granted the government one extra month – to the end of February 2025 – to have discussions on the future of the longs business, with an announcement expected in the second half of this month.

source:Important South African industry at risk – Daily Investor