‘The [tax] removal would also undermine the government’s stated commitment to industrial diversification and sustainability.’
Electric steel producers are uniting to halt South Africa’s largest steel producer ArcelorMittal SA’s (Amsa) call to end scrap export tax.
Amsa called on government to reduce the export tax on scrap to zero after it lost R466 million in the third quarter.
However, six electric steel producers are opposing the call, as they collectively make up 75% of the country’s long steel production capacity.
Keep the scrap tax
The businesses said electric steel producers in the country rely on scrap ferrous steel as a critical raw material to produce long products including steel bars and wire rods used in construction and mining.
“We are calling on the government to keep the export tax on scrap steel in place as it helps ensure the viability of greener domestic steel production by ensuring sufficient scrap availability.”
They are of the view that bringing the scrap metal export tax to an end would cripple smaller, greener steel producers who collectively make up 75% of South Africa’s long steel production capacity.
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Removal of scrap tax means job losses
Steel producers emphasised that the removal of the scrap metal export tax would threaten the survival of many local steel mills, which would result in thousands of job losses.
“The removal would also undermine the government’s stated commitment to industrial diversification and sustainability.”
Amsa on the call to remove the tax also said tens of jobs face a crisis if there is no urgent intervention by government. Other government interventions requested include implementing trade measures; addressing circumvention, and the reduction in electricity prices.
“Scrapping the export tax would also fly in the face of urgent worldwide trends to recycle and to decarbonise the steel industry by moving away from iron ore-based steel production,” added the electric steel producers.
Amsa already benefits from government
The producers are of the view that Amsa already benefits from government protection in the flat steel sector.
“This protection is despite the fact that it has a virtual monopoly in local flat steel production, government tariffs protect the company from lower-priced imports.”
They said Amsa’s poor financial performance is independent of the scrap export tax.
They also agree that reducing electricity and transport costs, as requested by Amsa is important.
However, they added prioritising Amsa would hurt the broader economy and likely lead to the closure of the firms involved in environmentally friendly steel production.
“Removing the tax would take SA a few steps back in its decarbonisation push and result in a less competitive local manufacturing industry.”
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Oversupply of local steel
The companies, SCAW Metals; Cape Gate; Veer Steel Mills; Unica Iron and Steel; Force Steel; and Coega Steel are calling on the government to not give into Amsa’s request, as it would address the oversupply of local steel.
“Together our newer and more environmentally friendly steel manufacturing processes, support well over 5,000 jobs, are cleaner and more sustainable.”
They call on the government to craft a balanced, forward-looking steel strategy that protects all players in the sector, ensuring a competitive, greener steel industry that aligns with global trends.
“South Africa cannot afford to favour a single company at the cost of thousands of jobs, industrial sustainability, and a vibrant, competitive market. We look forward to engaging with the government to ensure that decisions are taken in the best interest of the whole industry and the country.”
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