A NEW policy directive enabling local buyers of scrap metal to get it at 20% below the international spot price, have been welcomed by fabricators and smelters, amid the hope that this will stem growing exports of scrap metal to Asia.
The directive, introduced by government in early August, is aimed at reversing deindustrialisation in the country.
It would allow local buyers of scrap metal such as foundries, mills, minimills and secondary scrap processors to buy scrap at a preferential rate of 20% below the international spot price available to South Africa exporters of ferrous and nonferrous waste metals.
South Africa has in recent years seen an upsurge in exports of scrap metal exports, with much of this blamed on organised syndicates even targeting public infrastructure in an effort to take advantage of high metal prices, especially of copper.
At the beginning of August the Department of Trade and Industry published the policy directive that gives the International Trade Administration Commission the power to regulate the exportation of scrap metal by barring exports if the metal has not first been offered for local beneficiation at a price discount of 20%.
The Steel and Engineering Industries Federation of South Africa warned in 2012 that the benefits of converting scrap had long been recognised by South Africa’s trading partners. Export duties on scrap existed in most countries including China (40%), Argentina (20%), Iran (50%), India (20%) and Russia (15%).
Chairman of the Non-Ferrous Metal Industries Association of SA Bob Stone said reports by the National Foundry Technology Network showed that between 2007 and 2011 the country had faced a 13% drop in the number of foundries still operating.
The association said deindustrialisation in certain sectors, such as the automotive industry was quite advanced, with state-of-the-art equipment no longer available to the country and thousands of jobs already lost. The body’s membership comprises industries such as Copalcor, Fry’s Metals, Zimalco, Zinchem and Maksal.
Industries such as secondary metal smelters, foundries and scrap processors have suffered for the past 13 years due to the lessening availability of affordable and quality scrap metal as Asian exports of metals such as copper, brass, lead, aluminium and zinc "soared", said Mr Stone.
"This resulted in 10,000 job losses in the total foundry industry alone with the aluminium sector suffering the worst shedding up to 64% of production capacity over the last six years," Mr Stone said.
A recent survey of the foundry industry found that the sector was working at only half capacity, only 53.8% reported working five days a week, and 43.6% reported working reduced hours. Industry requested an almost 26% reduction in input metal costs.
In January Economic Development Minister Ebrahim Patel published a draft policy directive inviting affected industries to comment.
This came amid the recognition that increased exports were depriving the local steel minimills, foundries and other scrap-metal processors of affordable and quality inputs.
Seifsa said South African industries paid the highest price in the world for its input scrap material as all of it was priced at export parity prices.
Mr Stone said as demand for scrap metal increased the price rose to such an extend that the cost of scrap metal to the local industry amounted in some cases to 70% of their total running costs. He said that their were several other challenges facing the manufacturing industry in South Africa, but commended government for realising the need to level the playing field in terms of prices for an important input material in the manufacturing sector.
South Africa exports about 1.5-million tonnes of scrap metal every year, which is 40% of the country’s total scrap collections.
Source: bdlive.co.za
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