South Africa bans scrap metal exports for 2 months

South Africa's government has banned all exports of ferrous and non-ferrous scrap metal for two months in order to safeguard domestic supply while it considers measures to support the domestic industry.

The two-month pause took effect on 3 July, according to a government statement that day.

Scrap metal shipments that already received export permits or that applied for permits prior to 3 July will be allowed to go forward. The ministry also will issue permits for scrap metal that it determines is not being used by South Africa's domestic processing industry.

The move was made in response to appeals from South African scrap consumers that there is a shortage of affordable scrap metal in the country, despite existing measures to give priority to domestic buyers.

Current guidelines established in 2013 created a system under which scrap metal cannot be exported from South Africa unless it has first been offered to domestic buyers at a discount to international benchmark prices.

But South African industry has increasingly lobbied that this price preference system is not functioning adequately to keep scrap inside the country at prices affordable for local buyers.

Consequently, the South African National Treasury announced in March that it is considering levying export taxes on scrap metal.

Work on the export tax has been interrupted by the Covid-19 pandemic and the South African trade ministry has stepped in with the two-month export ban to address the near-term shortage of affordable scrap.

South Africa's annual exports of ferrous and stainless steel scrap amounted to almost 525,000t in 2019, according to Global Trade Tracker data. Nonferrous annual scrap exports registered at nearly 71,000t of aluminum scrap and 8,000t of copper, brass, and bronze scrap.

The export ban is another significant disruption of supply to India, the largest consumer of South African scrap metal. South Africa was the fifth-largest exporter of ferrous scrap to India in 2019, accounting for 416,000t or 5.9pc of Indian imports.

"This has impacted us a lot," one scrap exporter from South Africa to India said. "South Africa has top quality shred, it is clean and has high density. It is more lucrative to sell for export rather than selling it domestic. The domestic mills are finding it hard to get scrap."

The United Arab Emirates, India's largest scrap supplier in 2019 with 1.2mn t, imposed its own [four-month export ban from 15 May]( https://direct.argusmedia.com/newsandanalysis/article/2105320). That means that for the next two months, India has no access to more than 20pc of its 2019 supply.

However, the lower availability has not yet had any major impact on Indian scrap prices because Indian demand has been reduced as a result of the Covid-19 pandemic.

By Ronan Murphy