China’s Cheap Steel Comes at High Cost for South Africa: Industry Experts

The Arcellor Mittal Saldanha Steel plant which is threatened by closure is photographed on Nov. 21, 2019, in Saldanha Bay, about 175km North of Cape Town. Rodger Bosch/ AFP via Getty Images

JOHANNESBURG—One of the world’s biggest steel manufacturers, ArcelorMittal, announced earlier this month it’ll soon stop operating in South Africa, as the shockwaves felt in other parts of the world from a flood of cheap imports from China now reach Africa.

Steel sector analysts said Africa’s largest economy could lose 100,000 jobs as a result, according to South African investment news site Daily Investor. The potential job reduction would add to an unemployment rate of 32 percent, one of the highest in the world.

Irvin Jim, leader of South Africa’s National Union of Metalworkers, told The Epoch Times: “What we are dealing with here is a China that keeps on producing steel that it doesn’t need and then dumps it on the rest of the world.

“The constant inflow of cheap Chinese steel leads to local manufacturers losing market share. That results in factory closures and jobs being lost. It happened in Europe and Latin America and now it’s happening here.”

ArcelorMittal South Africa CEO Kobus Verster told The Epoch Times it’s no longer profitable for the company to make steel in South Africa.

“This isn’t unique to us,” Verster said. “Because of several factors, one of them being China’s actions, most of the world’s steel producers are now loss-making enterprises.”

In February 2024, South Africa’s International Trade Administration Commission, which monitors the country’s foreign trade sector, concluded that Chinese-made steel was being “dumped” in the country.

Its investigation determined that steel sectors across southern Africa were “experiencing material injury” as a consequence, and recommended that “definitive anti-dumping duties” be imposed against Chinese steel imports.

The South African government ignored the recommendation.

China’s annual steel exports continue to reach record levels, resulting in the average global price of steel in 2024 of $660 per tonne far below what it should have been, said Verster.

China is the world’s largest producer of steel, manufacturing more than a billion tons per year.

According to international steel sector watchdogs, a dramatic slowdown in China’s real estate and construction sectors in recent years has left it with many tonnes of unsold steel.

Justin Corbett, a veteran South African steel producer and a member of the country’s Iron and Steel Institute, told The Epoch Times China’s economic slowdown should have triggered a corresponding decrease in steel production.

“Instead, the Chinese government continued to subsidize its steel manufacturers to make even more steel and to offer them even more production incentives, and it’s this excess steel that we now see having such a devastating impact on local steel industries across the world,” he said.

“It’s grossly unfair and selfish of China to behave like this.”

President of the ruling African National Congress (ANC) and South African President, Cyril Ramaphosa speaks during the official election results announcement ceremony in Johannesburg, South Africa, on June 2, 2024. Chris McGrath/Getty Images

Beijing has said the accusations of steel dumping are unfounded and that they are a result of Western protectionism. The regime has also said that its economic success is rooted in competitive pricing driven by mass manufacturing and dictated by market forces.

According to an analysis by S&P Global, China exported 100 million tonnes of excess steel between January and November 2024.

Industry group UK Steel said in a report in October last year exports of Chinese steel rose by 38 percent in 2023 and a further 20 percent in 2024.

Because supply is so much greater than demand, it said, those steel exports are undercutting the cost of local production across the globe, resulting in job losses, production cuts, and concerns about the long-term viability of the industry.

To protect American steel, President Donald Trump plans to increase tariffs on U.S. imports of Chinese steel from the current 25 percent implemented by the previous administration, to 60 percent.

In South Africa, Verster said, ArcelorMittal was also “hit hard” by slow economic growth which in turn slowed demand for steel, and losses caused by prolonged electricity outages that swept the country the past few years.

While President Cyril Ramaphosa’s government had acted to ease these crises, said Jim, it had not done enough to protect local manufacturers from cheap steel imports from China.

Lucio Trentini, CEO of the Steel and Engineering Industries Federation of Southern Africa, told The Epoch Times that Africa hasn’t caught up with other regions in its strategies for countering China’s overproduction.

“Countries like the United States and Canada, in Europe and in the Asia-Pacific, have introduced quite significant anti-dumping measures against Chinese steel imports,” Trentini said.

“African governments have tried to do the same but generally their tariffs haven’t been high enough to mitigate the damage, or they’re targeted at very limited categories of Chinese steel, and we’re seeing damage in South Africa and also in the continent’s other major steel producing nations, Egypt, Nigeria and Algeria.”

Egypt has what it describes as a “temporary import tariff” of 17 percent on Chinese steel.

The South African government points to a duty of more than 35 percent on steel products, according to the National Employers’ Association of South Africa. Jim said this applies to a “very small section” of Chinese steel.

“There’s also politics involved here,” the metalworkers’ union leader said. “African governments are very hesitant to impose very high tariffs on Chinese imports because China is the biggest economic player on the continent and they don’t want to offend Africa’s largest trade partner and creditor.”

A spokesperson for South Africa’s Department of Trade and Industry, Yamkela Fanisi, said that Pretoria is “not afraid of China” and is committed to protecting the country’s steel industry.

“This industry’s the backbone of our industrialization and reindustrialization,” she told The Epoch Times. “We have had regular meetings with all stakeholders and we’ve told them if they have concerns, they must share them.”

Verster responded: “Government is good at listening to our complaints but is apparently not able to take decisions.”

One of those decisions, said Jim, should be to impose a tariff of at least 50 percent on all imports of steel from China and to introduce anti-dumping measures that are strictly enforced.

“We understand that a lot of people in our government are friends with people in the Chinese government but their first priority should lie with being friends to their own people,” he said.

Ramaphosa’s African National Congress (ANC), the largest party in a coalition government, is closely allied with China’s Communist Party, and China is the country’s largest bilateral trade partner.

Trentini said cheaper steel imports benefit sectors that use steel as an input, but their negative impact on local steel production hurts the entire manufacturing sector, from mining to transportation.

“Railways and mining operations and automakers need a lot of specialized steel to keep them going,” he said. “ArcelorMittal was making this specialized steel but it’ll soon be gone, leaving a massive gap. This specialized steel will now have to be imported and that will cause significant price increases across the board.”

Jim agreed that ArcelorMittal’s closure would negatively affect almost all manufacturing in the Southern African Development Community bloc.

“Neighboring countries relied on Arcelor to provide them with specially processed steel, especially for construction purposes,” he said. “South Africa’s auto sector will be very negatively affected, because it gets its specialized steel from ArcelorMittal.”

Corbett said ArcelorMittal’s exit would result in broken supply chains.

“We have some unique products which right now no one has the capability of manufacturing and therefore we’re going to have to be dependent on developing this overseas or importing the product,” he said. “The big motor vehicle manufacturers are in the same boat.”

Many of the world’s major automakers have operations in South Africa, including Volkswagen, Toyota, and Mercedes Benz.

“All are dependent to some degree on supplies from ArcelorMittal,” said Corbett. “They’re under extraordinary pressure to keep local production.

“Every time a new model comes in, it’s a marginal situation whether they continue manufacturing in South Africa or they look elsewhere.

“If we lose this critical steel capability, I’m afraid that we’ll also lose big labor-orientated manufacturing when these huge car firms relocate to other territories.”