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12. Oktober 2008

South Africa - Scrap exports affect pump supply

South African foundries cannot produce castings to meet the pump industry’s demand, South African Pump Manufacturers Association (Sapma) chairperson and pump solutions provider Hazleton Pumps MD Mathys Wehmeyer told.

Speaking at Electra Mining Africa 2008, Wehmeyer states that foundries are struggling to provide high-quality castings as quickly as the local market demands them, owing to a lack of raw materials and a favourable market for exports.

“A casting is the starting point for a pump. If there is not one available or if it is not of a high enough quality, then the pump cannot compete on the market,” says Wehmeyer.

He points out that although South Africa has a large amount of scrap material, scrap dealers are exporting as much as they can accumulate. Foundries draw a substantial amount of their raw material from scrap metal.

This has a twofold effect on South African foundries. Firstly, they struggle to find scrap material to use as raw materials.

Secondly, they struggle to find scrap material at a reasonable price. They pay a higher price because the demand far outstrips the supply. This price premium is passed onto pump manu- facturers and eventually makes its way to the end-user as the price of locally manufactured pumps increases.

Wehmeyer comments that this will make competitively priced products being imported from India and China more attractive to customers.

He adds that the favourable export rate is also affecting supply as foundries export much of their stock.

“During an economic cycle of greater exports, the foundries put all their energy into international contracts. Sapma’s concern is that South African pump manufacturers will be supplied with the tail-end of international jobs. We often receive material which has not been monitored and checked for quality to the same standard as the rest of the batch, or we get the dregs of the batch,” says Wehmeyer.

“As an association, Sapma has voiced its concerns to the Foundry Association. I have personally contacted the chair-person of the Foundry Association of South Africa with a view to committing to a regular meeting between the two associations,” say Wehmeyer.

To that end, Sapma would like to add companies that have a high demand for pumps to its voice. The involvement of bigger end-users, such as State-owned utility Eskom and petrochemicals giant Sasol, will provide a greater urgency to Sapma’s concerns and help create a foundation of better communication between the two associations to find a suitable solution.

“Sapma does not want to stop exports as this is money coming into the country, but it would like a balance between exports and contracts for the local market,” says Wehmeyer.

He comments that he would like to see the passing of legislation to keep scrap material, or most of it, in the country and legislation that allows foundries to export only if they have supplied a certain volume to the local market. He says this is necessary because a company will not concentrate on supplying to South African companies if it can generate larger profits exporting its products.

Wehmeyer proposes that keeping scrap material in the country will have a positive effect on South Africa’s energy crisis. Iron ore requires a substantial amount of energy to be turned into steel and there are great costs involved. Wehmeyer says scrap material is a resource that should be kept in the country and its exportation should be controlled. He says that by exporting  material, scrap dealers are doing the country a disservice and are giving foreign manufacturers a price advantage as the cost of refining iron ore into steel is less of a factor in their pricing structure.

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