LETTER: No basis to conclude a price cut will potentially help SA scrap suppliers

I refer to Bekezela Phakathi's article on the scrap metal industry (“Calls for more nuanced approach to metal theft crisis,” April 6).

I feel that it is incumbent on me in my capacity as chair of The Reclamation Group to point out a material  and glaring inaccuracy and misconception as presented in the article.

The author states that in his view “it should be emphasised, however, that an export ban will increase the supply of scrap locally and thus reduce prices, which could potentially benefit major local scrap players”.

This conclusion is, with respect, devoid of any economic foundation or fact, and flies in the face of all economic theory and the dynamic relevant to the scrap metal sector in SA, which as a matter of fact operates in a diametrically opposed manner.

The SA scrap metal industry and chain of supply is characterised by price makers and price takers. It is the consuming and foundry industries that occupy the position of price makers and not the supplying scrap metal suppliers, who are price takers in the industry.

There is therefore no basis on which to conclude that a reduction in prices will potentially benefit local scrap suppliers. The only beneficiaries of increased supply and lower prices are the steel making, consuming and foundry industries. This is in line with government objectives, and the current price preference system and export duty regulations, which were enacted precisely for this purpose.

Dave Kassel
Chair — The Reclamation Group

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