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South Africa: Scrap Metal Exports and the Foundry Industry
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Declining Foundries Industry
South Africa’s foundries have been in decline for more than a decade. In the
1980s there were about 450 foundries, till now more than half has been closed,
and employment in the industry has declined by 30%.
This attributes to several reasons: increasing input cost of raw materials like
scrap metal, expensive and erratic electricity supply, poor local demand for
foundry products, as well as rising imports.
Due to the poor local demand, the industry has not invested in the required
capital equipment and new technologies.
Restrictions to Stem Exports of Scrap Metals
Scrap metal is the key raw material in the foundry industry. In South Africa, the
high foreign demand and highly favorable exchange rate for scrap exporters
are driving market inequities, meanwhile charging local buyers export parity
To curb the exports of scrap metal, in September 2013, restrictions came into
full effect, which require that the scrap metal should first be offered to local
buyers such as foundries, mills and secondary scrap processors at a
preferential price of 20% below international spot price before the dealers can
be granted an export permit.
However, scrap merchants have blamed foundries for not making valid offers
to purchase scrap. They have to face longer waiting periods for export permits,
and some permits have been rejected for silly reasons.
Foundries have blamed merchants for finding ways to inflate the preferential
price. Bob Stone, chairman of the
Non-Ferrous Metal Industries Association, said that the scrap metal merchants
refuse to sell at the preferential price. The policy had not been successful in
In 2013, 52,000 tonnes of scrap aluminium was exported while in the first six
months of 2014 exports totalled 25,500 tonnes.
The Amendment of the Policy
In Sept. 2014, the country made amendments to the policy. Certain definitions
were added to clarify concepts such as what a valid offer entails.
However, the industry players think that the amendments will not remedy
long-standing viability issues in the sector since the restriction’s enactment.
Until March 2015, scrap metal exports continued to take place with and without