Kobus Verster, the CEO of ArcelorMittal South Africa warns in an IOL article that South Africa stands at a critical crossroads regarding its steel industry. The nation must decide whether it wants to cultivate a thriving, competitive domestic steel sector or become reliant on the unpredictable nature of international producers and imports. The primary steel industry holds strategic importance, not only for the economy but also for job creation and infrastructure development. The costs associated with losing domestic steel manufacturing capacity extend far beyond financial implications; they encompass broader socio-economic consequences that could jeopardize the nation’s long-term development. The choice is stark: a robust local industry that supports economic resilience or a dependence on foreign entities that may not prioritize South Africa's best interests.
The challenges confronting the South African primary steel industry are undeniable. Comprising 15 primary steel producers and two rerollers, the sector has been severely impacted by chronically low economic growth rates, insufficient infrastructure investment, and a lack of investor confidence. These issues have been compounded by an ongoing energy crisis, failures in rail and port logistics, and pervasive policy uncertainty. As a result, domestic steel demand has plummeted, further exacerbating the industry's struggles. Local importers often tout the competitive price advantage gained from cheap, subsidized imports, but this view is myopic and self-serving, focusing solely on short-term commercial gains rather than the long-term health of the industry. The ramifications of this short-sightedness could lead to a significant erosion of local manufacturing capabilities and job losses.
The global steel market does not operate under the principles of free trade that many might assume. Instead, it is characterized by producers who prioritize their domestic needs while exporting surplus steel competitively. In many cases, these producers benefit from state support and protection, allowing them to flood foreign markets, including South Africa, with artificially cheap steel. This influx of subsidized imports poses a significant threat to local manufacturers, who cannot compete with prices that are often unsustainably low due to foreign government subsidies. The competitive landscape becomes skewed, forcing local producers to either lower their prices unsustainably or face the risk of obsolescence.
The World Trade Organization recognizes the distortions caused by such trade practices and offers various remedies to member countries. Among these remedies is the ability to implement safeguard measures to temporarily restrict imports if domestic industries face injury or threats from surging imports. The evidence of a surge in steel imports into South Africa is compelling. Over the past decade, while local steel consumption has declined by 23%, imports have surged to account for 20% to 30% of apparent steel use, particularly since 2022. This is occurring even as South Africa's steel production capacity remains more than double that of its apparent domestic production. The implications of this trend are troubling, as it suggests a growing reliance on foreign steel that could undermine the country’s industrial base.
South Africa is not alone in grappling with the challenges posed by cheap steel imports. Countries worldwide have enacted up to 200 measures annually to counteract the influx of low-cost and often sub-standard imports. For instance, the European Union has extended its safeguard measures on steel imports until 2026, while the United States has significantly increased tariffs on imported Chinese steel. Other nations, including Brazil, Indonesia, Mexico, Thailand, and Canada, have adopted similar protective measures, while South Korea and Japan are currently reassessing their positions on steel imports. These global actions underscore a collective recognition of the need to protect domestic industries from the adverse effects of unregulated international trade practices.
Adopting safeguard measures against cheap imported steel is not merely a matter of protecting local commercial interests; it is fundamentally in the public interest. The local steel industry is integral to South Africa's economy, providing essential materials for electricity generation, urban development, transportation, and agriculture. High-quality, readily available local steel has been a driving force behind South Africa's progress as a nation, enabling the construction of vital infrastructure and fostering economic growth. The interdependence between steel production and various sectors, such as construction and manufacturing, highlights the critical role that a robust local steel industry plays in sustaining economic activity and ensuring national security.
To achieve its national developmental and economic objectives, South Africa must assert its industrial sovereignty. A robust local steel industry is crucial for fostering economic growth, ensuring a stable supply of steel, and reducing reliance on imports. Furthermore, the local steel value chain contributes significantly to job creation and skills development, with downstream beneficiation playing a key role in the industry. The local steel sector is responsible for creating up to 500,000 direct, indirect, and inferred jobs, a vital contribution in a country where unemployment exceeds 33%. This extensive network of employment opportunities not only supports families but also stimulates local economies, fostering community resilience in the face of economic challenges.
The benefits of the local steel industry extend beyond employment figures. Companies within the sector invest heavily in research and development, corporate social responsibility initiatives, and community upliftment programs. These efforts include educational initiatives in science and mathematics for thousands of learners and programs aimed at promoting female advancement through the Women of Steel initiative. By prioritizing education and empowerment, the steel industry is helping to cultivate a skilled workforce that can contribute to South Africa's long-term economic viability. Moreover, the commitment to corporate social responsibility reflects a broader understanding of the industry's role in society, emphasizing the importance of sustainable practices and community engagement.
Despite facing numerous challenges, local steel manufacturers are investing billions of rand into plant upgrades, greener production methods, and renewable energy initiatives, all aimed at ensuring the sustainability of this vital national resource. These investments are not only essential for maintaining competitiveness but also for aligning with global trends toward sustainable and environmentally friendly industrial practices. The shift towards greener steel production methods is particularly crucial in the context of climate change, as the industry seeks to reduce its carbon footprint and contribute to national and global sustainability goals.
Kobus Verster, the CEO of ArcelorMittal South Africa, underscores the importance of maintaining a vibrant domestic steel industry. He advocates for policies that support local production while addressing the challenges posed by international competition. The future of South Africa's steel sector hinges on the choices made today, as the nation navigates the complexities of global trade and local needs. The path forward requires a commitment to protecting and nurturing the local steel industry, recognizing its integral role in shaping South Africa's economic landscape and ensuring a prosperous future for generations to come. As the country grapples with these pressing issues, the decisions made will have lasting implications for the steel sector and the broader economy, highlighting the necessity of strategic foresight and collaborative action among stakeholders.
