Steel industry: the steel ‘basket price: just an illusion

Steel industry: the steel ‘basket price: just an illusion

AMSA continuously claims that their steel prices are determined by Government via the so-called “basket-price” principle. Although the term ‘basket-price’ was already coined in 2006, the flawed nature thereof was only exposed 10 years ago. 

In 2010, in a presentation by the Competition Commission to the appropriate parliamentary portfolio committee, it was pointed out that AMSA was “… prepared to blatantly mislead the Tribunal on [the implementation of basket pricing by AMSA]”. AMSA has been pulling the wool over the eyes of South Africans ever since.

AMSA is still publicly beating the ‘basket-pricing’ drum. As recently as last week, when they again claimed that they would like to increase prices but that they are unable to do so due to Government regulating the pricing via the ‘price basket’. This cannot be further from the truth. Local prices have recently skyrocketed as a result of the artificial shortage created by AMSA - when they only initiated a partial start-up after lockdown.

Furthermore, AMSA’s order book is closed, yet they continue to sell their steel on a tender basis - where the highest bidder gets the material.

Since the recent partial start-up, prices on certain items have increased by a whopping 40%. In total, prices have increased by 80% since the introduction of the duties in 2015 and, in respect of items being sold on the tender system, increases exceed 100%.

Even during the current debacle where AMSA is unable to supply the market:

  • they secured, in a manner contravening WTO rules, an extension of safeguard duties on hot-rolled coil which expired in August this year; and
  • they persist with their application for protectionist duties on nine new tariff codes of steel that they do not even produce.

Although the steel downstream finds itself in a desperate situation as a result of steel shortages and exorbitant prices, all as a result of duties protecting AMSA, a request by downstream role players to meet with Minister of Trade, Industry and Competition, has thus far been ignored. 

The fact is that the so-called “basket“ is just another form of make-believe. The steel committee clearly is a toothless institution. The only solution is for the Government to scrap all duties in order to alleviate the carnage experienced in the downstream. We, once again, call on Government to do so without any delay.