Policy offers preferential rate for SA metal buyers

28 Nov 2014
Business Day, page 2
Amanda Visser

IN AN effort to encourage beneficiation of scrap metals and slow exports of them, a policy directive cutting local prices to 20% below those on international markets has been introduced.

The directive aims to reverse de-industrialisation in the metals’ beneficiation and fabrication industries. It will remain in place for the next five years.

The policy will allow local buyers of scrap metal, such as foundries, mills, mini-mills and secondary scrap processors, to buy scrap at a preferential rate of 20% below the international spot price that South African exporters can get for ferrous and nonferrous waste metal. South Africa exports about 1.5-million tonnes of scrap metal every year, which is 40% of the country’s scrap collections.

The South African Chamber of Commerce and Industry said on Friday it was "broadly supportive" of the aim of reversing de-industrialisation. But its CEO, Neren Rau, said the interventions proposed might well be more costly to the economy than bringing any benefits to local beneficiation industries.

Economic Development Minister Ebrahim Patel published a draft policy directive in January saying an increase in exports deprived the local steel mini-mills, foundries and other scrap-metal processors of affordable and quality inputs.

The minister felt the proposed measures to curtail the export of scrap metal had to be strengthened to deal with job losses, de-industrialisation, and to improve competitiveness of downstream industries.

Early this month the Department of Trade and Industry published the policy directive that gave the International Trade Administration Commission (Itac) the power to regulate the exportation of scrap metal by disallowing exports if it had not first been offered for local beneficiation.

Itac said in its report it considered a number of factors in arriving at the 20% price preferential rate.

It said the foundries, operating below capacity, needed to achieve economies of scale. "In determining an optimal price preference rate, the commission found that it should be set at a sufficient level to assist the metals beneficiation industries in improving their competitive position, but not to have an unnecessarily adverse impact on the scrap metal collection industry," it said.

Mr Rau said by restricting exports, the government assumed that there was a domestic scrap metal supply shortage, and that waste exports was the main culprit.