The South African Institute of Foundrymen (SAIF) has come out in support of a draft government proposal to restrict the export of ferrous and nonferrous scrap metal through a mechanism stipulating that domestic consumers are given first right of refusal, as well as preferential prices.

The details of the proposed directive, drafted by the Economic Development Department, led by Minister Ebrahim Patel, were published in the Government Gazette of January 25 along with a call for public comments to be submitted by the end of February.

The notice indicated that the intention was to ensure security of supply for South Africa’s scrap processing sectors, which were seen as central to the country’s reindustrialisation and job creation objectives.

It noted that the number of foundries had already fallen by 13% between 2007 and 2011, while employment in the sector had declined by 30% over the same period.

SAIF CEO John Davies told Engineering News Online that, while the foundry sector respected the role that the metal recycling industry played in collecting and sorting scrap for reuse, the lack of access to competitively priced material had negatively affected foundries, many of which were small family owned enterprises.

He also highlighted the fact that other countries had also moved to either introduce exercise quotas, export taxes, or even total prohibitions on the export of metal scrap and the solution being proposed by the South African government appeared to be workable.

The draft directive stated that ferrous and nonferrous scrap should not be exported unless it had first been offered to domestic users for a period determined by the International Trade Administration Commission of South Africa (Itac) and based on a discount formula to be determined by Itac.

Exporters would also be required to secure a permit and permit applications would need to be accompanied by confirmation from a metallurgical engineer of the type, quality and quantity of material destined for export, together with the timing and destination of such exports.

Manufacturing Circle executive director Coenraad Bezuidenhout said the organisation concurred with government that that rapid increase in scrap metal exports had undermined local industry.

In addition, the “predatory posture” of certain scrap-metal exporters had contributed to the theft of public goods, such as steel road barriers and drain lids.  Therefore, Bezuidenhout supported “tougher regulations, subject to consultation with affected industries”.

“We believe it would particularly support foundries, which have found it hard to compete, both in the global and domestic market, due to lower demand and the proliferation of unfairly incentivised and illegal imports, particularly from China,” he added.

Davies stressed, though, that it was not SAIF’s purpose to prevent exports, but rather to ensure that the material was available domestically in the correct quality and at an affordable price.

He added that the foundry industry consumed about 15% of total collections. It is estimated that about 3.5-million tons of scrap metal is collected yearly, of which about 1.5-million tons is exported.

The Metal Recyclers Association and the National Recyclers Organisation had indicated previously that the imposition of export restrictions could have unintended economic and social consequences.

They highlighted, for instance, the fact that many poor people were dependent on collecting scrap for their livelihoods.

They also pointed out that scrap material was already available to domestic consumers first, owing to the fact that a permit system had been instituted.

Further restrictions could distort the market and act as a subsidy to domestic users of scrap metal.

The gazette notice indicated that the policy would be instituted for a period of five years and then be reviewed.