South Africa – The Institute of Scrap Recycling Industries (ISRI) has expressed ‘grave concern’ that South Africa is considering imposing restrictions on the export of scrap metals. In an open letter to the South African government, ISRI Vice President & General Counsel Scott Horne said the country’s new draft policy directive was conceived ‘with the stated intent to increase the supply of scrap metals available to domestic industry while also making the price of those scrap metals more affordable for the domestic industry’.
Although he acknowledged it may be ‘hard to appreciate’, Mr Horne pointed out that domestic scrap prices in most countries are driven by the global marketplace for the scrap materials and not by the local economy. He cited scrap metals as a ‘one of the purest examples of supply and demand economics’ and warned that the sector is ‘extraordinarily sensitive to even the slightest outside intervention’.
There were abundant examples of artificial intervention in the scrap markets – virtually all of them resulting in ‘disastrous consequences’, Mr Horne wrote. He recalled that restrictions were placed on the amount of scrap exported from the USA during 1973-74. Despite the imposition of export controls, the price of scrap continued to rise at such a rate that the US steel industry was forced to spend as much as US$ 2 billion more for ferrous scrap than it would have done without the drastic changes in legislation.
Should South Africa’s Economic Development Department succeed in limiting the supply of scrap available for export, the purchase prices would be driven up, causing a ‘wild scramble’ for scrap metal. ‘The stated objective of the suggested controls is to reduce the domestic price in South Africa. However, imposing controls on scrap metal exports could very well have the perverse effect of causing the exact opposite of what the South African government intends,’ concluded Mr Horne.
The fact that South Africa’s move is in violation of its obligations under the World Trade Organization’s international trade agreements presents yet another problem. The ISRI Vice President argued that the country must ‘seriously reconsider any notion it may have of restricting the export of scrap metals’.
For more information, visit: www.isri.org