Scrap metal industry fears effects of benefication policy

28 Nov 2014
Business Day
Amanda Visser

THE Competition Commission has received a range of complaints over the policy directive initiated by the Department of Economic Development earlier this year to reverse de-industrialisation in the metals beneficiation and fabrication industries.

The commission this week confirmed complaints from two scrap metal associations and a query from steel products manufacturer, Scaw Metals, over the anti-competitive effects of the export control guidelines that will be administered by the International Trade Administration Commission (Itac).

The policy will allow local buyers of scrap metal, such as foundries, 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.

Trudi Makhaya, deputy-commissioner at the Competition Commission, said the Recycling Association of South African and the Metal Recyclers Association complained that the export control policy would lead to unequal access to export markets.

The associations argued that consumers of scrap, who are vertically integrated with manufacturers, would have an incentive to buy from their rivals at the lower preference price, making it possible for their subsidiaries to export at the higher export prices, effectively blocking rivalries out of export markets.

Scaw’s legal representatives raised concern with the commission, saying the policy allowed competitors to meet "as and when required" to discuss issues specific to the administration of the price preference system. This provision in the policy explicitly encouraged them to meet and discuss prices, thus encouraging collusion.

The exchange of information between competitors, pertaining to prices, is a contravention of the Competition Act.

Ms Makhaya said it was possible that some provisions in the policy directive could be amended in a manner that accommodated some of the competition concerns.

"The commission will share its views and policy suggestions directly with Itac and the Department of Economic Development and other directly affected stakeholders.

“She said provisional dates to discuss the commission’s submission had been canvassed.

Itac referred Business Day to its report on the export control guidelines and to the Competition Commission for comment.