Mini-mills benefit from enormous support but at a huge cost to the economy as a whole
07 November 2024 - 17:58
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Neva Makgetla’s column on ArcelorMittal SA (Amsa) refers (“Crisis-hit Amsa cannot be allowed to win at all costs”, November 5). As always, she raises many good points but also, I think, gets a few important things wrong.
The price preference system (PPS) and the export duties on scrap metal do indeed suppress the price of scrap, but this does not come at zero cost to the economy. Between PPS and export duties, about R9bn is transferred from upstream, often small manufacturers and hardly a thriving industry, to a small number of mini-mills.
I’m a huge fan of cheap steel, but the price of steel coming out of the mini mills is cheap because someone else is funding that discount. This is not what I would consider a competitive industry. They have been supported since 2013, when PPS was created, and most would not survive if the support was withdrawn.
I’ve not been shy in criticising Amsa, but this has nothing to do with it, other than being on the wrong side of the policy. PPS and export taxes apply to both ferrous and non-ferrous scrap, a position that was secretly lobbied for by the mini-mill “working group” (I’m not joking, that really is what they call themselves).
It took a court case just to get their identities into the open. And yes, the mini-mills, all of which only process steel, got export duties imposed on non-ferrous metals too.
When Makgetla argues that “the decision about which producers should survive the current crisis should be taken on the basis of what is best for the national economy, not in response to heavy-handed lobbying and threats”, I agree with her.
We should not forget that the enormous support that accrues to the scrap consumers was a direct outcome of heavy-handed, secret lobbying by that industry and we should not pretend otherwise.
Donald MacKay CEO, XA Global Trade Advisors
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Perspective on scrap metal issues
Mini-mills benefit from enormous support but at a huge cost to the economy as a whole
Neva Makgetla’s column on ArcelorMittal SA (Amsa) refers (“Crisis-hit Amsa cannot be allowed to win at all costs”, November 5). As always, she raises many good points but also, I think, gets a few important things wrong.
The price preference system (PPS) and the export duties on scrap metal do indeed suppress the price of scrap, but this does not come at zero cost to the economy. Between PPS and export duties, about R9bn is transferred from upstream, often small manufacturers and hardly a thriving industry, to a small number of mini-mills.
I’m a huge fan of cheap steel, but the price of steel coming out of the mini mills is cheap because someone else is funding that discount. This is not what I would consider a competitive industry. They have been supported since 2013, when PPS was created, and most would not survive if the support was withdrawn.
I’ve not been shy in criticising Amsa, but this has nothing to do with it, other than being on the wrong side of the policy. PPS and export taxes apply to both ferrous and non-ferrous scrap, a position that was secretly lobbied for by the mini-mill “working group” (I’m not joking, that really is what they call themselves).
It took a court case just to get their identities into the open. And yes, the mini-mills, all of which only process steel, got export duties imposed on non-ferrous metals too.
When Makgetla argues that “the decision about which producers should survive the current crisis should be taken on the basis of what is best for the national economy, not in response to heavy-handed lobbying and threats”, I agree with her.
We should not forget that the enormous support that accrues to the scrap consumers was a direct outcome of heavy-handed, secret lobbying by that industry and we should not pretend otherwise.
Donald MacKay
CEO, XA Global Trade Advisors
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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