By John Helmer in Moscow
South Africa’s Columbus Stainless Pty Ltd, the country’s only producer of stainless steel, has been targeted for anti-dumping action by a Russian steelmaker, who is himself under pressure of a foreign bank default, and takeover interest from the state.
The Mechel specialty steel and mining group, owned by Igor Zyuzin, has lobbied the Russian government for protective duties to block imports of stainless steel. Although Mechel denies lobbying, and Russian trade ministry officials have denied preparing a new import duty penalty, the ministry has published an official notice, confirming that it has commenced an anti-dumping inquiry.
Columbus confirms that it has received official papers relating to the Russian action, but declined to comment for the time being. Acerinox of Spain has a 76% shareholding in Columbus. The rest of the shares are held equally by Samancor (which is an Anglo American and BHP Billiton Plc joint venture) and the Industrial Development Corporation of South Africa, a state enterprise. Columbus is situated in Middelburg, Mpumalanga.
Stainless steel is the 9th largest export from South Africa by value, according to statistics of the Department of Trade & Industry (DTI). However, DTI reports no sales to Russia. These appear to have been recorded as entering Russia from another country office of the Acerinox group.
Last year, there was a sharp downturn in SA exports of stainless steel to R2.8 billion worldwide ($301 million); in Rand terms, this was a 75% decline from the 2007 total of R11.4 billion ($1.7 billion).
Most of the imports which Mechel is attempting to keep out of Russia originate from China. According to the latest import statistics from the Russian Customs Committee, in 2007 SA sold 10,707 tonnes of thin stainless sheet to Russia, for a declared value of $24.5 million. China sold 24,622 tonnes at $46.2 million. In the last quarter of 2008, the Russian customs data show SA sold 3,621 tonnes for $12.6 million; China sold 6,466 tonnes for $17.4 million.
The Russian Trade Ministry stainless steel notice (Prikaz no. 189) is dated March 25, 2009. It says that the Ministry’s department for state regulation of foreign trade has been ordered to start an anti-dumping investigation of stainless steel from Brazil, China, Taiwan, South Korea, and South Africa. The notice says the order has been issued on the application of Mechel’s Chelyabinsk steel-mill, the Red October Steel Works in Volgograd, and the Serp i Molot Plant in Moscow.
The three mills together hold an 83% share of the Russian market, most of which is claimed by Mechel. The stainless steel division of the Mechel group was identified some time ago as a potential target of takeover interest by the state-owned metals congolmerate, Russpetstal (RSS). RSS has already acquired control of the Red October mill, one of the complainants in the latest trade action.
The Chinese Commerce Ministry announced on March 27 that the Russian anti-dumping (AD) investigation had been initiated. There had been a warning from Chinese officials of the move four days earlier. However, on March 25, the Russian Trade Ministry spokesman, Alyona Shipilina, denied her ministry was targeting stainless steel from China, claiming she knew nothing of a new AD investigation, and adding that perhaps the Chinese had misconstrued the ministry’s investigation of polymer-coated steel, which is already under way. Shipilina did not confirm the official action on imported stainless until April 3.
In retrospect, it is now clear that Chinese Commerce Ministry officials knew of the Russian decision to launch the AD investigation for stainless steel at least ten days before ministry officials were willing to acknowledge it publicly.
Mechel, Russia’s dominant stainless steel producer, is even more reticent, refusing to confirm the AD application, or to clarify what damage stainless imports have inflicted on the company’s market share or revenues. This is not the only import protection Mechel has sought from the government in Moscow. In February, Mechel sought a government ruling to impose penalty import duties for coking coal of up to 15%; Mechel’s mining division is one of the largest producers of coking coal in Russia.
A source close to Mechel claims that no lobbying for trade protection has occurred, and that lobbying as such is “illegal”.
Zyuzin, Mechel’s controlling shareholder, is especially sensitive to public notice, because he was personally criticized last year by Prime Minister Vladimir Putin for price and supply rigging in the coal market. Then on March 20, he and his company failed to meet a deadline for repaying or refinancing a $1.5 billion loan from a group of foreign banks that fell due on that date. Mechel has subsequently announced that it has agreed with the banks to extend their negotiations until May 15.
The reluctance of the Trade Ministry to admit that it is taking anti-dumping action against China reflects the sensitivity in Moscow to offending a vital trading partner, whose imports of steel from Russia are the key to the revival of output at the Russian mills. There is also fear that if Moscow imposes protective duties on Chinese imports, Beijing will react with tit for tat. Speaking at the Davos conference in February, Prime Minister Vladimir Putin charged that protectionism was “unrestrained economic egotism.” But he also conceded that the pressure from the Russian steel industry for protection from imports is difficult for him to resist. “True, we are increasing import duties of certain ready-made equipment to promote Russian manufacturers-but I don’t think we are extremists in this respect. We are also reducing and even abolishing import duties for technical equipment, especially of the kind Russia is not manufacturing, thus promoting Russian industrial advancement.”
Imports of stainless to the Russian market from the countries now targeted amounted to just 28,800 tonnes in 2007, according to the Trade Ministry in Moscow. But they had been climbing from a minuscule base. According to the Trade Ministry in Moscow, in 2004 these imports had totaled 6,700 tonnes, and the increase over the three-year interval has been 4.3 times.