South Africa\u2019s ferrous scrap metal resources may fail to meet domestic demand should either the export tax thereon or provisions of the Price Preference System (PPS) be relaxed.<\/p>\n\n\n\n
This finite resource is primarily used in the manufacturing of green steel, which has increasingly been replacing traditional steel-manufacturing methods worldwide.<\/p>\n\n\n\n
Simply put, carbon emissions, affecting the wellbeing of current and future generations, are around four times higher when steel is produced from iron ore and coal compared to melting scrap.<\/p>\n\n\n\n
To stimulate the local green-steel industry and to align with the global trend, Government introduced the PPS (September 2013) and export tax (August 2021) on scrap metal.<\/p>\n\n\n\n
These measures have led to questions being asked about the long-term viability of the country\u2019s solitary primary-steel producer, which, in turn, have led to pressure being put on the authorities to revisit their policies.<\/p>\n\n\n\n
Meanwhile, the secondary-steel industry has raised concerns that the availability of scrap will come under pressure should the tax and\/or PPS be removed or reset.<\/p>\n\n\n\n
It will effectively mean that SA will instead export its scrap metal to South Asian countries, resulting in more competition to buy scrap and therefore increasing the production costs of the greener mini-mills.<\/p>\n\n\n\n
Amit Saini, a director at the electric steel-producing mini-mill Coega Steels, believes the country cannot afford to toy with the existing policies that are already \u201conly just\u201d managing to preserve scrap stocks.<\/p>\n\n\n\n
He warned that backpedalling on these would be \u201cdevastating and create an existential crisis\u201d for mini-mills, which rely on the repurposing of scrap in the manufacturing of their product.<\/p>\n\n\n\n
\u201cDeindustrialisation is a real possibility if the export tax is done away with and the PPS overhauled,\u201d he said.<\/p>\n\n\n\n
\u201cIncreased production costs are all but guaranteed because of greater competition for scrap, making us less competitive in Africa and other foreign markets.\u201d<\/p>\n\n\n\n
With more mini-mills \u2013 one each in Nigel and Durban \u2013 due to come online soon and existing producers continuing to expand their capacity, Saini said the availability of scrap would be even further compromised.<\/p>\n\n\n\n
In addition, SA Steel Mills, a mini-mill currently under business rescue and up for sale, will consume an estimated 300 000 tonnes of scrap annually as soon as production stabilises under the new owners.<\/p>\n\n\n\n
Saini, whose company is based in Gqeberha in the Eastern Cape, said the scrap that would be needed by the Meyerton-based plant did not align with the availability of stock in Gauteng.<\/p>\n\n\n\n
\u201cIt\u2019s just not there.\u201d<\/p>\n\n\n\n
As it stood, he explained, the installed production capacity in the secondary-steel manufacturing sector was estimated at 2.5 to 2.8-million tonnes annually, meaning 2.7 to 3.0-million tonnes of ferrous scrap was needed.<\/p>\n\n\n\n
Adding the capacity of the two new green-steel producers and planned expansions to the existing ones, this number is estimated to grow to 4.0-million in 2026.<\/p>\n\n\n\n
Saini warned that tinkering with the current regulations, which would more than likely trigger a reduction in production, would put thousands of jobs at risk.<\/p>\n\n\n\n
The country\u2019s 13 mini-mills, which are far and away the top consumers of domestic scrap, currently employ in excess of 5 000 workers.<\/p>\n\n\n\n
The PPS requires scrap-metal dealers to sell their wares to local clients at 30 per cent less than international prices (although there are consumers paying more than the regulated rate).<\/p>\n\n\n\n
Many nations have and are implementing measures to restrict scrap exports in an effort to retain this critical resource.<\/p>\n\n\n\n
Due to the shift towards decarbonised production and greener steel the global demand is projected to rise by almost 50 per cent by 2050, according to the Organisation for Economic Cooperation and Development.<\/p>\n\n\n\n
Saini, who recently said he believed SA could become Africa\u2019s green-steel hub, also pointed out that mini-mills were positioned closer to demand hubs, effectively neutralising the problem of high transportation costs.<\/p>\n\n\n\n
\u201cYet, all this potential will be lost if tax and PPS policies are changed.\u201d<\/p>\n\n\n\n
He said prioritising the preservation of scrap and ensuring sustainability of green-steel production locally was \u201cimperative\u201d.<\/p>\n\n\n\n
It would be \u201cunthinkable\u201d for SA to allow exportation of these resources for the benefit of other countries, he said.<\/p>\n\n\n\n
\u201cWe cannot head in the opposite direction by liberalising the PPS discount. Instead, we should look at imposing an outright ban on the export of ferrous scrap.\u201d<\/p>\n\n\n\n
This would align with what the rest of the world was doing, he said.<\/p>\n\n\n\n
The GMK Centre, a consulting company focused on the European Union\u2019s iron and steel markets, predicts worldwide sea-borne trade volumes will decrease as local beneficiation increases, leading to a rise in prices.<\/p>\n\n\n\n
Its latest Global Scrap Exports Restrictions report reiterated that \u201cscrap prices will be regulated through trade restrictions\u201d in local markets.<\/p>\n\n\n\n
In the EU, for example, enforcement of changes to the Waste Shipment Regulation in May 2027 will lead to a ban of ferrous scrap exports by 27 countries.<\/p>\n\n\n\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
South Africa\u2019s ferrous scrap metal resources may fail to meet domestic demand should either the export tax thereon or provisions of the Price Preference System (PPS) be relaxed. 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