The International Trade Administration Commission (Itac) has completed its initial investigation into the supply of scrap metal as an input to the domestic steel-producing industry.

The commission has made certain changes to the Price Preference System (PPS), effective from October 2, to improve access to affordable scrap metal for the domestic steel and other metals producing industry.

Trade, Industry and Competition Minister Ebrahim Patel in July issued a trade policy directive to Itac to consider appropriate amendments to the PPS guidelines to address the shortage of good-quality scrap metals.

The Department of Trade, Industry and Competition (DTIC) earlier this year received representations from the domestic consuming industry that the PPS was not achieving its intended objectives and was causing harm to the industry in that there was an inadequate supply of input metal.

The PPS was introduced in 2013 to promote affordable supply of scrap metal to domestic steel and other metal makers by requiring scrap dealers to first offer scrap to the domestic consuming industry at a prescribed discount to international prices, before it can be exported to other markets.

During the period of Itac’s investigation, the administration of the PPS and export of scrap metal was suspended to address some of the immediate challenges with affordable access to inputs for domestic steel and other metal makers.

This while a Steel Master Plan is under development to support the industry and stimulate demand, through consultation with industry stakeholders, including manufacturers and organised labour.

GUIDELINE CHANGES

Some of the key changes made by Itac to the PPS include the imposition of an additional discount of 10% where domestic consumers are located in inland provinces and scrap metal is located at the coast to account for transport costs; the right for domestic consumers to weigh and inspect the materials to ascertain that material delivered is the same quality, type and weight as agreed to when the offer was made and concluded; and the right to claim reasonable compensation for costs incurred where quality, type and weight differ from what was agreed.

The PPS changes also provide for increased surveillance by Itac to ensure that materials – in terms of quality, grades and quantities – comply with the approved permit, including the right to take legal action for any misrepresentation from sellers; and ensure that scrap dealers have adequate facilities for the access, loading and weighing of scrap.

Failure to provide these will be seen as an impediment and constitute grounds for refusal of a permit application.

The amendments to the guidelines are intended to improve domestic consumers’ access to affordable scrap metal and address the concerns raised by the industry in the interim period, says Itac.

The introduction of an export tax as a long-term policy measure is currently under consideration.

Itac in August recommended an export tax rate of R1 000/t for ferrous metals, including stainless steel, R3 000/t for aluminium, R8 426/t for red metals and R1 000/t for waste and scrap metals.

Ensuring the affordable supply of scrap metal to the domestic steel industry is critical, it states.

The scrap metal industry, in turn, is of critical importance as a supplier of raw material into primary and secondary metal production.

The industry contributes R15-billion to gross domestic product and employs about 350 000 people, many of whom are involved in informal collection.

Metals are reusable and maintain their useful properties once they have been processed and ultimately scrapped.

Scrap metal is also important as a feedstock in the production of downstream metals owing to the relatively lower energy consumption and its lower carbon footprint versus other metal production processes. It is widely seen as a strategic resource and many countries have scrap metal policies and regulations in place to support the development of their domestic metal producing industries.

To this end, the DTIC will monitor the supply of scrap closely and the effectiveness of the amendments to the PPS. In the event that the affordable supply of scrap metal to domestic steelmakers remains constrained, further measures will be considered by government.