The increased costs of overheads in the recycling sector, which have resulted from significantly lower volumes of scrap being produced by the diminished manu- facturing sector, are one of the three primary challenges for the local scrap metal industry, says Metal Recyclers Association (MRA) of South Africa chairperson Juan Patuel.

The decreased value of scrap metal, as a result of the current strength of the rand against foreign currencies and suppressed international metal prices, is a challenge for the local scrap metal sector.

Patuel says that the extended uncertainty surrounding government’s proposed export tariff for scrap metal, which, if passed, will further decrease the value of scrap metal, is adding to the burden faced by scrap merchants.

Duties on the export of scrap metal would not necessarily encourage scrap metal dealers to keep scrap in the country rather than sell it on the international market, but would reduce the price of scrap, as well as the income of scrap dealers, and this would affect about 1,8-million informal collectors.

Factors that need to be considered regarding the proposed tariff include international free-trade agreements, which South Africa has signed, demands on the National Treasury and the fact that South Africa is a member of the World Trade Organisation. The South African Institute of Foundrymen told Engineering News earlier this year that research would need to show that more jobs would be created through the introduction of the tariff if it was to be beneficial to the local metals and foundry industry.

Economic consulting company Econex completed a study earlier this year on the effect of the proposed export duty on scrap metal on behalf of the National Recyclers Organisation. The results are currently under review by the Department of Trade and Industry, together with reports produced on behalf of the MRA and other stakeholders.

Patuel says that the MRA has made repeated requests to government for updates on the proposed tariff, but no new information has been provided.

In the construction sector, he says, the volumes of most types of scrap, including aluminium scrap, have shrunk as a result of the reduced availability of the type of work that produces scrap, such as building renovations and demolition work.

Aluminium scrap is significant in the aluminium industry because the energy required to remelt scrap aluminium is much less than the energy required to smelt primary aluminium. Patuel says, “In almost all instances, consuming industries use scrap before primary metal.”

He adds that, while there has been an increase in the volume of scrap produced by the residen- tial sector, it is still significantly less than the volume of scrap produced by industry.