Scaw Metals is supporting the proposed amendments to the price preference system (PPS)

Steel manufacturing major Scaw Metals is supporting the proposed amendments to the price preference system (PPS) policy guidelines for local scrap metal it has said in Engineering News. The PPS will govern future exports of ferrous and nonferrous scrap metal from South Africa through one harbour – Port Elizabeth.

The amendments aim to align the PPS with the Second-Hand Goods Act and government’s black-economic-empowerment policy, while also tightening up permit application and administration processes.

Scaw Metals CEO Markus Hannemann says the company fully supports the PPS framework because its intent is to ensure the steady supply of high-quality scrap-metal material to local users; it also proposes reasonable prices that will enhance support for the local steel industry.


He adds that the local steel sector will benefit from the amended PPS policy because it will result in securing jobs, based on increasing South Africa’s competitiveness in handling local volumes of scrap metal and “levelling the playing field” in terms of international scrap metal handling.

“With competitive scrap prices, the industry will undoubtedly grow, thus creating additional jobs that are sustainable, and boosting the knock-on effect for the supporting industries, including refractory companies, sand and chemicals companies, machine shops, spares departments and consumables,” Hannemann elaborates.

Scaw Metals is serious about value addition, as opposed to the large-scale export of raw material to the detriment of industry, he states. Scrap is a precious resource, says Hannemann, adding that, by limiting or halting exports, the domestic volumes of scrap metal will increase and, subsequently, the price of local scrap metal volumes will drop.

He says there is no risk in losing international trade because the countries to which South Africa exports scrap metals ban exports of their respective scrap metals outright. He mentions that this “recipe” will assist the steel manufacturing industry in regaining its footing.

Seeking stabilisation
Scaw Metals, like many other steel manufacturers in South Africa, recently succumbed to straining profit margins and overcapacity issues, implementing a restructuring programme that saw the issuing and enforcing of a notice in terms of Section 189A of the Labour Relations Act.

The company stated in August last year that the unfortunate decision to file for a Section 189A was necessitated by local and global conditions in the steel industry. Hannemann notes that Scaw Metals is currently in a post-Section 189 stabilisation phase: “We are focused on ensuring the high morale of the remaining workforce, and alignment of the business’ objectives remains the priority.”

Beyond Section 189, he states that all Scaw Metals’ businesses are working towards improved performance.

“We recognise the need to adapt to a dynamic, changing and competitive landscape,” says Hannemann, adding that the company can now explore new business prospects beyond its traditional boundaries.

Imports and exports
Scaw Metals’ exports are increasing year-on-year, compensating for weak domestic demand, Hannemann says, adding that the company’s largest overseas clients include North America, Europe, Australia and numerous African countries. However, the global economic slowdown, as a result of the China market crash, has affected Scaw Metals’ largest client base – mining. The market is further being crippled by China’s large-scale dumping of steel, which is reducing steel value and impacting on other sectors served by Scaw Metals. Therefore , Hannemann suggests that incentives to export value-added products should be considered by the South African government to mitigate further industry harm.

“We encourage the use of 100% locally manufactured steel products. Local value addition is key to developing South Africa’s economy. The current local designation policy is inadequate to sustain the industry, and further designation opportunities exist and need to be implemented urgently,” he concludes.