According to Coega Steels director Amit Saini, South Africa is in no position to play with existing policies that are already ‘only just’ managing to preserve scrap stocks.
Image supplied.
He warned that backpedalling on export tax or provisions of the price preference system (PPS) would be ‘devastating and create an existential crisis' for mini mills, which rely on the repurposing of scrap in the manufacturing of their product.
Less competitive
“Deindustrialisation is a real possibility if the export tax is done away with and the PPS overhauled,” he said.
“Increased production costs are all but guaranteed because of greater competition for scrap, making us less competitive in Africa and other foreign markets.”
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 three million tonnes of ferrous scrap was needed.
Adding the capacity of the two new green steel producers and planned expansions to the existing ones, this number is estimated to grow to four million in 2026.
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.
The country’s 13 mini mills, which are far and away the top consumers of domestic scrap, currently employ in excess of 5,000 workers.
Retaining critical resource
The PPS requires scrap metal dealers to sell their wares to local clients at 30% less than international prices (although consumers are paying more than the regulated rate).
Many nations have and are implementing measures to restrict scrap exports to retain this critical resource.
Due to the shift towards decarbonised production and greener steel, the global demand is projected to rise by almost 50% by 2050, according to the Organisation for Economic Cooperation and Development.
Green steel hub
Saini, who recently said he believed SA could become Africa’s green steel hub, also pointed out that mini mills were positioned closer to demand hubs, effectively neutralising the problem of high transportation costs.
“Yet, all this potential will be lost if tax and PPS policies are changed.”
He said prioritising the preservation of scrap and ensuring the sustainability of green steel production locally was 'imperative'.
It would be ‘unthinkable’ for SA to allow exportation of these resources for the benefit of other countries, he said.
“We 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.”
This would align with what the rest of the world was doing, he said.
The GMK Centre, a consulting company focused on the European Union’s iron and steel markets, predicts worldwide sea-borne trade volumes will decrease as local beneficiation increases, leading to a rise in prices.
Its latest Global Scrap Exports Restrictions report reiterated that “scrap prices will be regulated through trade restrictions” in local markets.
In the EU, for example, enforcement of changes to the Waste Shipment Regulation in May 2027 will lead to a ban on ferrous scrap exports by 27 countries.
