US steels itself against SA imports
The domestic steel industry is pushing for tariff protection from cheap imports – but, in a bizarre turn of events, steel producers in the United States have applied for anti-dumping tariffs to be placed on South African imports.
Stranger still is that ArcelorMittal USA is one of the three applicants requesting anti-dumping duties and has identified ArcelorMittal South Africa as one of four companies that produce the import in question. ArcelorMittal South Africa is responsible for more than 70% of domestic steel production.
In an application lodged with the US International Trade Commission on April 8, ArcelorMittal USA, Nucor Corporation and SSAB Enterprises have collectively petitioned for anti-dumping duties to be imposed on some carbon and alloy steel cut-to-length (CTL) plate from South Africa and several other countries, including Brazil, Belgium, China, France, Germany, Italy, Japan, South Korea, Taiwan and Turkey.
Paulo Trinchero, the chief executive of the Southern African Institute of Steel Construction, said CTL plate is steel coil that is uncoiled and cut to size.
The petitioners in the US claimed CTL plate from these countries is being, or is likely to be, sold in the US at less than fair value according to the Tariff Act of 1930.
Of the four South African companies identified by the US petitioners to produce CTL plate – ArcelorMittal South Africa, Augusta Steel, Evraz Highveld Steel and Vanadium, and Kennametal – it remains unclear who could be responsible for the alleged dumping.
Nico Erasmus, sales director at Augusta said the company didn’t even have the furnaces to produce CTL plate. Mike Hankin, managing director at Kennametal said nothing the company produces domestically is exported. Evraz closed its doors in February and ArcelorMittal South Africa told the Mail & Guardian it doesn’t “produce or sell CTL ‘cut-to-length’ plate to the US or any other market”.
Nevertheless the US petitioners remain confident of their case against South Africa.
According to the US application, “the low-priced subject imports have had a significant injurious impact on the domestic industry. Virtually all of the US producers’ trade and financial indicators declined over the period of investigation, because of surging subject import that undersold the domestic industry and took volume and suppressed and depressed prices ... Between 2013 and 2015, as demand declined and subject imports continued to pour into the US market, the domestic industry lost significant market share.”
The applicants argued that the rapid and dramatic increase in both the volume of imports and their market share demonstrates their ability to enter the US market quickly and in large quantities. The application showed a breakdown of imports of CTL plate to the US between March 2015 and February 2016. Those from South Africa were among the smallest, contributing 1.65% to the total. Korea (20.95%) was the single largest, and Germany was the second largest (17.71%).
Regardless of the difference in market share, the applicants argued the imports from each of the countries exceeded the “negligibility threshold” during a 12-month period as defined in US law.
“Imports of CTL plate from Austria, Belgium, South Africa, Taiwan and Turkey, while individually below 3% of total imports [the threshold], are not negligible because the aggregate volume of subject imports from those five countries is 7.29%.”
The applicants also asked that countervailing duties – tariffs specifically levied on imports from industries that have benefited from subsidies or assistance – be placed on some carbon and steel CTL plate from Brazil, China and Korea.
Many countries are using tariffs to protect their steel industries because the oversupply from Chinese steel mills has flooded the market, depressed the price and put many producers out of business.
In South Africa, a 10% import tariff was placed on some steel products coming into the country in December last year. But it was not enough to stop Evraz Highveld Steel and Vanadium from closing its doors after a failed business rescue attempt in February.
In a submission to the World Trade Organisation (WTO) last week, South Africa said it had initiated an investigation of safeguard measures (protection from imports if the domestic industry is injured or threatened) for some steel products. The application was lodged by the South African Iron and Steel Institute on behalf of its members, the largest being ArcelorMittal SA.
Trinchero said it was unclear which domestic producer could be supplying CTL plate to the US. ArcelorMittal SA was the only real plate manufacturer, Trinchero said, but noted they would not typically cut to size. It could also have been caused by an odd influx by the likes of Evraz which, in the process of going out of business, might have sought to sell all the steel on their workshop floor.
“This is the most bizarre situation,” said Donald MacKay, the director of XA International Trade Advisors, “and it becomes even stranger because our volumes are small”.
Anti-dumping tariffs on these products are unlikely to have a significant effect on the domestic steel producers, but “it is a bit distracting at a time when you yourself [the domestic steel industry] are bringing an application for safeguard measures”.
“In order for the US to have initiated the case, there needs to be prima faci evidence,” MacKay said. “So there is a chance that there may very well be evidence of South African CTL plate selling below fair value in the US – most people in the steel sector who export anything else are probably dumping,” he said.
The investigation will have to show that there has been dumping – selling the product cheaper to the US than in South Africa – and that dumping has caused injury to US producers, MacKay said.
South African producers will need to prove that they are not doing so. If domestic CTL plate producers don’t respond, they will be assumed guilty, MacKay said.
He said the WTO only becomes involved if one of the countries wishes to dispute a tariff decision.
The International Trade Administration Commission of South Africa (Itac) said it had no knowledge of the US application, and that its main responsibility is to investigate complaints made by domestic producers. “The responsible department to deal with this issue is the department of trade and industry. Itac will only provide advice to the department when solicited,” the commission said.