Pretoria – The International Trade Administration Commission of South Africa (ITAC) is to urgently investigate measures to help support the metals industry which, as a result of the coronavirus (Covid-19) pandemic, faces several serious problems due to increased global demand for raw materials and a significant price increase for all main inputs into the sector, the Trade, Industry, and Competition Department (dtic) said.
The downturn in global manufacturing resulting from Covid-19 had led to the amount of scrap metal available locally and internationally being dramatically reduced and, as a result, prices had increased sharply, the department said in a statement.
"Scrap metal is an essential material for the domestic processing industry, which itself is crucial for the South African manufacturing industry and for infrastructure development," Trade, Industry and Competition Minister Ebrahim Patel said.
"Due to the steep global increase in prices and reduced economic activity, the industry has called on government to urgently assist it.
"I have therefore issued a trade policy directive to ITAC to urgently investigate the market conditions around the demand-supply imbalance in the scrap metal industry as a result of Covid-19.
"The objective of this investigation is to determine appropriate amendments to the price preference system (PPS) guidelines which can address the shortage in affordable good quality scrap metal," Patel said.
No ferrous and non-ferrous waste and scrap of any kind could be exported during the investigation unless the ITAC determined that it would not be used by the domestic processing industry.
"This would not affect existing export permits or applications made before the date of the notice in the government gazette. The ITAC had been directed to complete its investigation within two months.
"Our long-term plan for the industry, which was announced by the minister of finance during his budget speech in 2019 and which is widely agreed upon within the sector, is to introduce an export tax on scrap metal as soon as possible.
"Whatever measures we take now are temporary to deal with this immediate challenge created by the Covid-19 pandemic, but they also lay the basis for the new steel industry masterplan," Patel said.
The metals value chain was central to South Africa's industrialisation and had significant links to infrastructure, construction, mining, and a range of manufacturing industries.
The three largest consumers of metal products in South Africa were the construction industry, the mining industry, and the transport equipment manufacturing industry, which together accounted for about R750 billion or 15 percent of South Africa’s GDP and employed nearly two million people, both formal and informal, he said.
The scrap metal industry, in turn, was of critical importance as a supplier of raw material into primary and secondary metal production.
The industry contributed R15 billion to GDP and employed about 350 000 people, many of whom were involved in informal collection. Metals were reusable and maintained their useful properties once they had been processed and ultimately scrapped.
Scrap metal was also important as a feedstock in the production of downstream metals due to the relatively lower energy consumption and its lower carbon footprint versus other metal production processes.
It was widely seen as a strategic resource and many countries had scrap metal policies and regulations in place to support the development of their domestic metal producing industries. Over 30 countries imposed some sort of restriction on scrap metal.
In 2013, a PPS administered by the ITAC was introduced by Patel, then economic development minister, regulating the export of ferrous and non-ferrous scrap by banning scrap metal exports unless it had first been offered to domestic consumers at a discount to the international price at the time of sale.
While the PPS had provided greater certainty of affordable scrap metal supply to the local industry, a policy decision had been taken to introduce an export tax on scrap metal. The dtic and National Treasury were working on this.
Government continued to put in place measures to support the beneficiation and availability of good quality affordable scrap metal to foundries and mills.
As announced by President Cyril Ramaphosa during his state of the nation address in February this year, the government was working with industry stakeholders to develop a master plan for the entire steel and metal fabrication value chain.
Key parts of the plan were expected to be circulated to industry stakeholders for comment within the next month.
In addition, the dtic had established an inter-governmental working group to increase efforts to combat illicit trade of scrap metal with the help of the South African Revenue Service.