The chairman of a South African industry body has criticised the country’s metal recyclers for ignoring the effect their opposition to the government’s directive to curb scrap exports has had on its floundering foundry industry.

Scrap exports have climbed significantly in the last few years, while beneficiated scrap has declined, as it became less competitive,” Bob Stone, chairman of the Non-Ferrous Metal Industries Assn, said.

“The knock-on effect on the local foundry industry is highlighted by the [number of] closures over the same period,” he said.

Since the start of the millennium, some 33 aluminium diecasters have ceased operations in South Africa, resulting in 3,840 job losses, according to NFMIA calculations.

Thirteen of these companies were diecasters that supplied the domestic automotive market.

During the same period, aluminium scrap export volumes increased to 47,103 tonnes in 2011, from 33,363 tonnes in 2003, while first-stage beneficiated scrap exports declined to 1,816 tonnes in 2011, compared with 13,803 tonnes in 2003.

Scrap is a 70% input cost for smelters, which in turn sell to the foundries, which would make the foundries’ alloy cost around 40% of their total input costs.

At this rate, increasing scrap prices have played an undeniable role in the decline of South Africa’s manufacturing industry, alongside power and labour costs, Stone said.

Under the directive currently being reviewed, scrap will not be exported unless it has first been offered domestically at a government-set discounted price.

Also, scrap has to be graded by metallurgists, a move that Stone believes will finally bring some benefit to aluminium smelters and diecasters in South Africa.

He said that under the current regulations, scrap merchants must apply for export permits. However, they apply – and get – permits for larger quantities than they often export.

“Scrap merchants would apply for a permit as a company, regardless of whether their respective yards had scrap on the floor,” he said.

“Under the [new] directive, each yard must apply, and only after offering to the local market. So you can’t get a permit unless you have material to export.”

Some recyclers are increasingly earmarking higher-grade material for export because they can obtain higher prices, he said.

This leaves only poorer-quality scrap for local buyers, he added.

Aluminium smelters need well-sorted, high-grade aluminium scrap, he said.

Stone said he had been to yards where he had seen piles of better-grade scrap, ready to be sold, but the scrap merchant would refuse to sell the scrap to him, saying that the material was for export.

“This is an unworkable situation. Scrap merchants cannot claim to have no responsibility for the state of distress the foundry industry finds itself in,” he said.

Bianca Markram