Industry organisation the Recycling Association of South Africa (RASA) has lodged a complaint with the Competition Commission about the alleged extended blocking of export permit applications in the ferrous scrap metal market by dominant buyers, as well as the alleged use of brokers to signal and coordinate significant price movements.

This conduct appears to have been designed to suppress prices at the collection gate through the manipulation of market conditions, RASA says.

It submitted additional evidence to the commission about the alleged “coordinated and anticompetitive” conduct in the ferrous scrap metal market.

RASA says that, for a period of two months, dominant buyers systematically blocked export permit applications, which effectively denied sellers access to the export market. Despite there being no physical shortage of scrap, the number of buyers in the domestic market was significantly reduced.

This created conditions of an artificial monopsony – a market in which dominant buyers dictate prices and terms – as the dominant domestic buyers had significantly greater power to dictate prices and terms, it says.

RASA alleges that, on June 18, a notice was issued through brokers announcing a substantial price reduction of R800/t across all grades, effective July 1. This would have amounted to a massive one-off 25% drop in domestic ferrous scrap prices and was not aligned with international market benchmarks.

At the end of June, the price reduction implemented by the dominant buyers was R250/t. Several other buyers did not follow the full extent of the announced reduction, the organisation says.

On July 9, the same dominant buyers increased their buying prices by exactly R200/t on the same day, it alleges.

“This coordinated price increase was again communicated through brokers and occurred against international market movements, which makes the behaviour suspicious,” RASA says.

“Dominant buyers continue to use the regulatory framework of the Price Preference System (PPS) not for genuine local beneficiation, but to manipulate market conditions to the detriment of the upstream sector and hundreds of thousands of informal waste pickers,” says RASA chairperson Geoff Borrajeiro.

“We have provided detailed evidence to the commission and call on the authorities to act decisively to restore fair competition and protect vulnerable participants in the value chain,” he says.

RASA and metal recycling associations have called on the commission to urgently investigate these practices.

The organisations have also requested that the Department of Trade, Industry and Competition and the International Trade Administration Commission of South Africa implement their earlier recommendation to suspend the PPS, pending an independent investigation into system manipulation.

The associations remain committed to constructive engagement with government while continuing to advocate for a transparent, equitable and sustainable scrap metal policy environment, RASA says.

Further, this alleged conduct forms part of a longer pattern of alleged abuse of the PPS, says RASA. Government’s own socioeconomic analysis found that R4.9-billion of wealth was transferred in 2023 from formal metal recyclers and about 400 000 informal waste pickers to a small number of domestic mini-mills.

The recycling sector has lost more formal jobs since 2010 than mini-mills employ, with the policy producing a regressive outcome that harms the poorest participants in the value chain, RASA says.

The combination of export permit blocking, interprovincial transport for which sellers must carry the full cost of delivery, often rendering transactions uneconomic, and coordinated price signalling has severely undermined competition and suppressed prices at the collection gate.

Even some buyers have acknowledged that the current structure of the PPS makes many interprovincial transactions commercially unviable, RASA avers.