Scrap metal issue requires inclusive industry debate

The recent concerns regarding the proposed amendments to the price preference system (PPS) policy guidelines for local scrap metal require debate and input from all role-players, such as exporters and domestic users of scrap metal, says steel industry representative organisation the Southern African Institute of Steel Construction (Saisc) CEO Paolo Trinchero.

The PPS will govern future exports of ferrous and nonferrous scrap metal and has been described by industry as “rushed” and “exclusionary” for some organisations and auxiliary industries such as hauliers.

The amendments aim to align the PPS with the Second-Hand Goods Act and government’s black economic-empowerment policy, while tightening up permit application and administration processes, even to a stipulation of the times at which PPS-related transactions can be concluded.

The proposed changes were published by the International Trade Administration Commission of South Africa (Itac) in the government gazette of December 11 and were open for public comment until February 5.

Domestic users of scrap metal say the PPS will benefit them, with increased access to local scrap metal at competitive prices, but scrap metal merchants and exporters say the PPS will lower the price of scrap metal and bottleneck export potential and channels.

A key point and bugbear to exporters and hauliers of the proposed PPS is that all scrap metal due to be exported must be channelled through one harbour – Port Elizabeth. Hauliers say this will lead to complications, as trucking routes from Port Elizabeth pose the threat of becoming ‘dead’ routes, owing to difficulties in finding cargo to be transported from Port Elizabeth after scrap metal has been dropped off at the port.

“The PPS requires recommendations and cooperation from the entire steel industry to get a balanced view regarding the impact of the regulations on each role-player,” says Trinchero, adding that key to its success is a unified stance from interested and affected parties.

In this regard, he encourages Saisc members to report to Itac, which will aggregate the findings and concerns, and subsequently meet with Saisc to report back on the best way forward.

He says that role-players, including steel mills, foundries and scrap metal merchants, need to be consulted regarding the proposals made in the new PPS.

New National Interest
As a result of increased debate over, and attention to, local scrap metal, a few concerns have emerged.

International Steel Fabricators of South Africa (ISF) CEO Neels van Niekerk says that the current amendments indicate that the Department of Trade and Industry (DTI) is not satisfied with the effects of the previous scrap dispensation.

The DTI, he says, has made a tremendous effort in assisting in the upgrading of the foundry industry, which must be seen as a key national asset. “It is understandable that the foundry industry, just like the other primary and secondary steel industries in South Africa, currently requires further assistance against unfairly priced imported products,” says Van Niekerk.

He adds that there appears to be some anomalies in the effects of current scrap pricing and availability. “Two years ago, a Russian company interested in producing nanotechnology reinforcing bar, for which it proposed to use scrap as the ferrous input, decided against investing in South Africa, quoting high local scrap prices as one of the major obstacles. This seems to contradict the apparent requirement to export large volumes of scrap steel from South Africa,” Van Niekerk tells Engineering News.

He is convinced that there is insufficient information available on the effects of scrap steel prices and availability in South Africa: “If the local industry has a surplus of scrap metal, rather than exporting it, we should view it as a national asset and in the national interest to produce lower-priced steel for local demand and export.

“The industry needs more information, such as accurate statistics of the volumes of scrap metal accumulated in South Africa, how much is exported . . . [and how much is] used locally and the grades thereof,” concludes Van Niekerk.