Johannesburg - Scaw Metals chief executive Markus Hannemann yesterday called for a ban on scrap exports as a measure to counter the scarcity of good quality scrap for domestic users.
The high volumes of scrap exports, mainly to India and Pakistan, had led to scrap shortages in South Africa, he said. Scrap steel is the key raw material ingredient for the South African mini-mill and foundry industry.
“It is important to note that an outright ban of exports from South Africa is ultimately what would no doubt be effective for the industry. This will undoubtedly create a huge surplus of scrap material locally. The resultant effect would translate into substantially reduced prices, thus providing a vital source of competitive advantage for the growth of an industry that could easily beneficiate this material into secondary value-added products,” Hannemann said.
Hannemann said while ample steel scrap existed locally, vast exports had led to the shortages. “The resultant shortage has fuelled local prices of scrap material thus further impeding the country’s manufacturing competitiveness.
“Given industry cries and the obvious quantum of scrap exports, the government introduced the preferential pricing system (PPS) in 2013 in an attempt to limit the export of both ferrous and non-ferrous scrap. Against industry pleas of an outright ban on the export of scrap or at least an export tax, government chose to implement the PPS.”
In terms of the PPS, local buyers of scrap metal, such as foundries, mills, “mini-mills” and secondary scrap processors, are supposed to get the product at a price below the international spot price.
Regulations
However, he said, the PPS had so far proven to be ineffective in limiting the export of scrap material. He said amendments to the PPS, currently being considered, were pointless as scrap exporters would continue to circumvent regulations.
He said the company had had discussions with authorities, including the Department of Trade and Industry, Department of Economic Development and the International Trade Administration Commission (Itac).
“All these government entities have a role in the development and implementation of the PPS policy,” he said.
He said the exports eroded opportunities to beneficiate scrap material. He said the closure of more than 200 foundries had seen local manufacturers rely on imported products from Australia, Canada, China, Malaysia and India.
“While we all loudly voice our aspirations of raising beneficiation levels, it is frustrating that the basic low-hanging beneficiation opportunities within the ferrous and non-ferrous scrap manufacturing sector are stifled by a lack of a firm policy similar to those of our international trading partners,” he said.
“The beneficiation of competitively priced scrap material is undoubtedly the easiest beneficiation opportunity that can quickly yield much needed jobs and at least tame the aggressive importation of basic products produced from scrap,” Hannemann said.
BUSINESS REPORT