South Africa’s International Trade Administration Commission (ITAC) has introduced a new price system to ensure that South African steel mills receive affordable and ample supply of domestic scrap. ITAC announced the new system after completing its initial investigation into the supply of scrap metal as a raw material to the domestic steel producing industry.
In order to support domestic steelmakers, the commission has made changes to the Price Preference System (PPS) effective Oct 2. The earlier system failed to fulfill its objectives. Most scrap suppliers preferred exports for better prices which lead to a short supply of good quality scrap to the domestic steelmakers.
The country had suspended ferrous scrap exports during the period of ITAC’s investigation to ensure supplies to domestic steelmakers. Also, the impact of COVID-19 lowered scrap availability drastically. Domestic metal industries in South Africa struggled with the earlier PPS systems amid the pandemic and requested for a new price system.
Changes made by ITAC
• There would be an additional discount of 10pc if domestic consumers are in inland provinces and when scrap metal is located at the coast, to account for transport costs;
• Domestic consumers will have the right to weigh and inspect the materials to ascertain that material delivered is of the same quality, type and weight as agreed to when the offer was made and concluded;
• Buyers will have the right to claim reasonable compensation for costs incurred where quality, type and weight differ from what was agreed.
In 2013, ITAC had introduced the PPS system to ensure the supply of low-cost domestic scrap to the steelmakers. Suppliers could offer scrap to the domestic industry at discounted prices before the material is offered to international markets. The system meant to provide increased surveillance by ITAC in regards to quality, grades and quantities and 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.
In August, ITAC has recommended an export tax rate of ZAR1,000/mt ($60.28) for ferrous metals, including stainless steel, ZAR3,000/mt for aluminum, ZAR8,426/mt for red metals and ZAR1,000/mt for waste and scrap metals. As per the ministry, the introduction of an export tax is under consideration.
South African scrap metal industry contributes ZAR15bn ($906mn) to South Africa’s gross domestic product and employs about 350,000 people including many involved in collection activities. South Asian buyers like India, Pakistan and Bangladesh import 90pc of the total scrap exports from South African, which is approximately 0.5mn mt per annum.