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SA stainless steel industry holding steady, imports a problem – Sassda

SA stainless steel industry holding steady, imports a problem – Sassda
March 13, 2015 admin

The South African stainless steel industry is experiencing steady growth, but government needs to ensure that the playing field for importers and local industry players is level, Southern Africa Stainless Steel Development Association (Sassda) executive director Bill Scurr tells Engineering News.

He highlights that stainless steel is regarded by some as an aspirational material for use in kitchens and consumerware items.

“As South Africa becomes a wealthier country and per capita gross domestic product rises, Sassda sees no reason why South Africa should not follow the global trend of experiencing significant growth in terms of stainless steel use across all major industries,” states Scurr.

Moreover, he points out that Sassda members are actively supplying large volumes of stainless steel goods to thefood and beverage industries in South Africa and sub-Saharan Africa.

In the petrochemicals sector, the stainless steel industry is awaiting the decision on the proposed $9-billion to $11-billion Project Mthombo crude oil refinery, in the Eastern Cape, which will be based on a framework agreement between South Africa’s national oil company PetroSA and China’s petroleum and petrochemicals group Sinopec.

“The stainless steel component of Project Mthombo is rather small, as it relates to the structural components of the refinery, particularly to the desalination plant needed to supply water to the refinery,” he clarifies.

However, Scurr stresses that this portion of the project will present a significant amount of possible business revenue for the local stainless steel industry.

Imports Challenge to Local Industry

“Finished product imports pose a serious challenge to the local stainless steel industry, which is by no means unique to this indus- try – most local manufacturing industries are struggling with finished product imports. The challenge of cheap Asian imports is quintessentially a war of attrition,” he states.

Sassda is currently in discussions with government about increasing the applied rates to the bound tariffs on stainless steel products that are manufactured locally. This is to level the playing fields between the local manufacturers and imports.

The bound tariff rates are the maximum rates allowed by the World Trade Organisa- tion (WTO) for any member State for imports from another member State.

Sassda fabrication, welding and technical adviser John Tarboton tells Engineering News that, in South Africa, there are many cases where the applied rate tariffs are 0% and many Sassda members are requesting that the tariff for imports be increased to the maximum bound rate, which is typically 15% in many cases. This, he explains, is to ensure that local companies can compete with cheap Asian imported stainless steel products.

Further, Sassda market intelligence specialist Lesley Squires says one of the major complaints from local fabricators about import tariffs is that certain components for the local fabrication of products, such as heat exchangers, have import tariffs associated with them. However, if local fabricators import a complete heat exchanger, for example, from India, then they can do so tariff free.

Therefore, local manufacturers are being placed at a serious disadvantage, owing to the existing regulations, she explains.

Tarboton points out that the issue of raising tariff rates does not amount to protectionism but rather a means of levelling the playing field between manufacturers and imports.

Another challenge is that many imported stainless steel products do have tariffs, but these tariffs are being bypassed, as the productsare imported into South Africa for projects and, if a product is required for a project, the tariff on the product is waived.

Further, Tarboton and Squires stress that the harmonised system (HS) codes, and the descriptions associated with this system, which is used to allocate tariff pricing on imported goods, is so compli- cated that Sassda employed former International Trade Administration Commission of South Africa chairperson Danie Jordaan to manage the system.

Squires also explains that many companies incorrectly label goods to avoid paying higher tariff prices, which is why ensuring that HS coding is correctly applied is critically important.

Tarboton says, owing to these challenges, it is even more important for tariff rates to be raised to the levels allowed by the WTO and applied by South Africa’s trading partners to ensure that South African manufacturers and fabricators can compete fairly with their international counterparts to have an equal chance of succeeding.

In September, Sassda completed the first phase of a potential antidumping claim against hollowware imports from China, with this first phase indicating that there are strong probable grounds to take legal action against the companies concerned.

How or whether Sassda and/or its members take further action is still a matter of debate within the industry, says Scurr.

“Industry can debate whether imports have their merits, but Sassda has a responsibility to protect the interests of the local stainless steel industry,” he adds.

Moreover, there is general consensus that a level playing field is needed in the manufacturing industry. State subsidies are being provided for Chinese manufacturers by their government. However, such subsidies are not available to South African manufacturers, thereby making it significantly challenging for local manufacturers of stainless steel products and suppliers to compete.

According to Statistics South Africa, South Africa’s unemployment rate for the second quarter of this year was 25.6%. In light of these worrying figures, Scurr believes that creating job opportunities in the stainless steel industry is important and large volumes of imports severely impede such initiatives.

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