Highveld Steel, which recently reopened its heavy structural mill in Mpumalanga despite still being in business rescue, has welcomed the institution of 10% import-duty protection on certain heavy steel sections and shapes. However, CEO Johan Burger tells Engineering News Online that Highveld plans to pursue safeguard duties across the range of products being produced at the mill, which was officially reopened in partnership with ArcelorMittal South Africa (AMSA) in June.
AMSA is supplying primary material to the mill under a contract manufacturing agreement signed in December. The agreement will operate for an initial period of two years with an option to extend for a further year. In addition, AMSA has an option to purchase the Highveld Structural Mill business after the initial two-year period, subject to regulatory and governance approvals.
In early August, Finance Minister Malusi Gigaba published notice of the 10% duty in the Government Gazette. The protection covers U, I and H sections, as well as other angles, shapes, and sections.
However, the duties do not apply to imports arising from the rest of the Southern African Development Community, the European Union, and the European Free Trade Association countries. In fact, this base protection was approved for in late 2015 but only came into force once the Highveld heavy structural mill was recommissioned.
Burger tells Engineering News Online that imports remain a threat to the mill’s continued survival, which is why Highveld and AMSA “will be seeking safeguard protection for our range, similar to the recently announced protection on flat products”.
The flat products referred to include hot-rolled coil (HRC) and plate, which, since August 11, have been receiving safeguard protection of 12% over-and-above the 10% base protection granted in 2016. These safeguards have been approved by the International Trade Administration Commission of South Africa and have been communicated to the World Trade Organisation.
The rate of safeguard duty will remain at the 12% level until August 10, 2018, after which the duty will decline to 10% in the second year and 8% in the third. Given that HRC and plate already enjoy base protection of 10%, the effective duty on steel products will be 22% in the first year, falling to 20% and 18% respectively in the two outer years.
Such protection remains controversial, with some steel consumers concerned that it will trigger higher domestic selling prices. However, AMSA insists the duty will not influence domestic selling prices for flat products, which are governed by a pricing agreement between the company and government.
Burger reports that the revamped mill has been performing well from a quality, yield and throughput perspective since its restart earlier in the year and that more than 30 000 t has been produced to date.
The mill is still in a ramp-up phase but has produced around 90% of its historical range being U, I, H and L sections. “Despite market challenges we are pleased with the mill performance, including the input blooms and slab supplied by AMSA, which was the salient unknown factor for the Highveld mill process.”
Despite weak market conditions, Burger says domestic market acceptance has also been positive and attributes persistently high import levels to customer import cycles and hedging while the mill recommissions its full range. Products sold to date have been delivered mainly to the domestic mining, construction, engineering, and fabrication industries.