South African Smelters Complain About Exports

South African manufacturers of aluminum secondary alloys are complaining that large volumes of aluminum scrap are leaving the country.

John Reid, joint managing director of Parow based Metlite Alloys, one of the leading manufacturers of secondary alloys, says giant industrialized countries like India, China, Russia and Brazil cast their nets far and wide and pull in all the scrap they can lay their hands on. This saves them all the electrical input costs that countries like South Africa have put in. Added to this is that they impose tariff protection so that companies like Metlite cannot compete with the very ones that are harvesting cheap scrap locally.

This scrap has fallen into the hands of three or four major collectors who are exporting up to 3 000 tons a month - representing about 60 percent of South Africa’s scrap production.

He points out that countries like Brazil and Russia totally stopped all exports of scrap and they are now both leading world players in terms of ingot and component supplies.

Metlite, like many other producers, structured to manufacture specified aluminum alloy ingot for use in the die-casting industry and, as such, entirely dependent on the supply of aluminum scrap. But they are finding themselves increasingly thwarted in their efforts to continue to maintain their position in the market because of the ever-increasing volumes of scrap being exported to far eastern countries, Reid says.

He argues that South Africa is a net importer of aluminum with the country’s primary supplier being Billiton in Richards Bay who produce aluminum from alumina imported from Australia.

Billiton’s major cost though is electricity that constitutes more than 60% of the cost of aluminum production. Yet, by world standards, South African electricity comes cheaply and once converted aluminum can be recycled over and over again with only 12 percent of the original energy input. Thus the great demand for local scrap, according to Reid.

“By exporting scrap aluminum our country is giving away substantial power investment to countries who have questionable labor practices and very irresponsible environmental controls. At the same time they are depriving us of valuable raw material that has significant add on potential. By buying our scrap countries like China and Korea are saving their countries the cost of expensive electrical power input,” Reid argues.

“Our company could achieve the same profit were we to stop our manufacturing facility and merely export our scrap in competition with the scrap merchants. These same scrap merchants who under normal circumstances would value us as a customer, have no regard for our position in the supply chain.”

“The shortage of scrap is forcing the foundry industry to use primary aluminum to compete with far eastern countries who are using our aluminum scrap,” Reid says.

The result of curtailed scrap exports could be far-reaching. More secondary smelters will be established and die-casting foundries would be more competitive on export markets. All of this will create many more jobs and increased foreign earnings will result. Reid says the value of scrap aluminum will be lowered and the theft of aluminum in all forms of electrical wiring, bridge rails road and street signage will diminish.

The industry is lobbying the Department of Trade and Industry to re-introduce export duties (it’s asking for 30%) and this is under review now. Government is taking very seriously the loss of this resource. Cape (South Africa) Business News