South Africa’s downstream steel industry will be crippled by the closure of ArcelorMittal SA’s (Amsa) Newcastle plant for three months, raising the call for the lifting of import duties on the metal.

National Employers Association of South Africa (Neasa) chief executive, Gerhard Papenfus, said on Monday that the firm’s natural protection against imports, which made it a “consequentially highly profitable business”, needed to come to an end.

This comes after Amsa recently issued a notice indicating that it was planning a three-month shutdown of its Newcastle furnace, which is used to produce ‘long products’, to conduct repairs to return it to its full operational status.

Amsa has blamed this decision on the lockdown-induced shutdown in 2020, which had resulted in the mill never regaining its ability to operate optimally.

In terms of ‘flat products’, Amsa operates two blast furnaces in Vanderbijlpark.

The firm recently notified the steel industry that it intended to shut down the bigger of the two for a period of three weeks, blaming Transnet for being unable to supply raw materials.

“We are all aware of the demise of our rail network and it has now come to affect the supply of steel to the South African market,” Papenfus said.

He said Amsa had the “absolute monopoly” on flat products, which had resulted in the steel downstream industry being burdened by import duties, aimed at protecting Amsa but which hampered the importation of raw material for production processes.

“Amsa is complaining about the shrinking steel market. This injury, however, is partially self-inflicted. Neasa, on numerous occasions, warned about the demise of Amsa’s own customers as a result of the duties that they so eagerly sought.”

“Now, with Amsa’s temporary shutdown, the problem will be exacerbated with the downstream paying a ‘tax penalty’ for being forced to import,” Papenfus said.

“Perhaps most importantly, Amsa cannot enjoy duty protection, which prevents the downstream from importing steel and then present reasons why they are not capable for not being able to adequately supply the market.

“Amsa can’t have its cake and eat it,” he said.

He said Amsa already enjoyed natural protection against imports and was highly profitable due to elevated steel prices, because it was the only producer in the region, and also due to exorbitant transport and shipping costs.

“The cost to import raw material in competition with Amsa is much higher compared with other regions. Amsa abuses these advantages and has always priced this into its local selling-price.”

He said Amsa had ignored its undertaking to government to make steel available to the downstream industry at a developmental price, which had caused the industry to shrink. He called for the government to lift import duties on steel.

“For as long as the duties are in force, the de-industrialisation of the South African steel downstream will continue. The steel downstream absolutely requires the right, whenever the need arises, to import steel from wherever it wants, free from any import duties.”

“For the steel industry to survive, the scrapping of the import duties is paramount,” Papenfus said.