Three bodies representing scrap metal recyclers in SA have called for an inquiry into all policies impacting the sector after last week’s ruling by the Competition Tribunal that some buyers were involved in price fixing.
In a statement, the Recycling Association of South Africa (Rasa), the Metal Recyclers Association (MRA), and the Scrap Recycling Coalition welcomed the tribunal’s ruling, which “confirms the existence of a buyers’ cartel in the scrap metal market”, while urgently calling for a full, independent inquiry into all government policies impacting the metal recycling sector.
Read: Is government’s steel policy helping itself or the country?
ArcelorMittal and Columbus both admitted liability and reached settlements with the Competition Commission (CompCom).
Scaw Metals was given corporate leniency after agreeing to cooperate with the investigation. This relates to events the tribunal says ended 17 years ago.
Cape Gate denies the allegations, but this was rejected by the tribunal.
The company has stated that it will appeal the ruling, asserting that its purchasing practices have always been fair and undertaken with the full knowledge of the Department of Trade, Industry and Competition (dtic) and the CompCom.
This is disputed by scrap metal recyclers.
Read: 17 years after the fact, Cape Gate found guilty of scrap metal price-fixing
“This guilty finding is a vital step towards accountability, but it underscores a disturbing pattern of collusion that has persisted for over two decades, eroding the viability of the metal recycling sector,” says Rasa in a statement.
“Recyclers have long borne the brunt of artificially depressed prices, and the tribunal’s confirmation validates years of complaints about buyer power abuses.
“However, the real crisis today lies in how government policies – intended to support local industry – are being exploited to perpetuate this harm.”
Two key policies
Scrap recyclers have complained for years about two policies in particular:
- The price preference system (PPS) for scrap metal, which forces them to sell to local steel mills at 30% or more below international prices; and
- Export duties that make it uneconomic to export scrap.
They further allege that local mills – in which the Industrial Development Corporation has R14 billion investment exposure – abuse the PPS by placing fake orders to purchase scrap, and then cancel them later to frustrate efforts to export the material and earn international prices.
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Read: Steel billet exports increase, scrap metal exports slump
Both the PPS and export duties were introduced to promote domestic beneficiation, but have been used by dominant buyers to foreclose competition, say the three scrap metal bodies.
Recyclers report that low PPS benchmarks and selective export blocks have forced them to compete for sub-grade materials at unviable prices to the ultimate benefit of larger mills.
This has effectively wiped out intermediate processing and threatens thousands of jobs in a sector contributing over R40 billion annually to GDP.
Deep-dive outlined
“We are not just asking for a review,” says MRA in a statement.
“We demand a thorough, transparent inquiry involving all stakeholders to investigate the origins of these policies, their implementation flaws, and any undue influence from cartel participants.
“The International Trade Administration Commission of South Africa’s administration of the PPS must be scrutinised for fairness, and the CompCom should probe whether these mechanisms facilitate ongoing exclusionary conduct.
“Without urgent reform, the circular economy goals of the National Waste Management Strategy will remain unattainable.”
The three scrap metal bodies have launched an anonymous whistleblower channel for industry insiders, suppliers, and observers to submit information securely.
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They note that while Cape Gate may appeal the tribunal’s ruling, it remains in force until overturned by the Competition Appeal Court.
Cape Gate responds
Cape Gate chair Oren Kaplan replied by saying that the company’s purchasing practices have always been fair and conducted with the full knowledge of the dtic and the CompCom.
“At no point did sellers of scrap metal agree among themselves or with Cape Gate to fix or determine local prices.
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“We are in the process of appealing the tribunal’s decision,” it adds.
“It should also be noted that, during the time of the alleged cartel activities, scrap suppliers were unrestricted with regards to exports, giving them access to international markets at international prices, meaning they were not forced to sell at a particular price.
“The PPS was established in 2013 by the government, five years after the commission acknowledges the alleged behaviour ceased, to ensure that steelmakers and foundries have access to sufficient and affordable scrap metal before it is exported. This PPS was designed to enable competitive beneficiation of scrap metal within South Africa and to prevent valuable scrap resources from being exported for processing abroad into finished steel products – a cycle that undermines local industrialisation and jobs.
“Cape Gate supports the objectives of the PPS and believes that, when administered optimally, it strengthens South Africa’s manufacturing base and contributes to industrial growth and much-needed job creation. Many countries protect domestic scrap supplies to secure a sustainable input for their steel industries that use the scrap to create steel products.
“Cape Gate remains committed to fair competition, local beneficiation, and the responsible development of South Africa’s steel value chain.”
Not so fast
Scrap suppliers dispute Cape Gate’s claim of unrestricted export access, pointing to the tribunal’s finding of a coordinated pricing formula that suppressed domestic purchase prices and disadvantaged suppliers.
Even if exports were technically available, this created economic pressure on suppliers to accept lower local offers, distorting market dynamics.
Read:
The associations further claim the introduction of the PPS mirrors the cartel’s prohibited pricing template by linking domestic prices to global indices but with fixed discounts and premiums, “thereby perpetuating anti-competitive harm to suppliers and the economy”.
“This linkage raises concerns of undue influence in policy design, potentially violating prohibitions on anti-competitive agreements.”
The whistleblower channel
The scrap recycling bodies set up the anonymous, encrypted whistleblower channel to receive tips on cartel activities, policy abuses, or unfair practices without fear of reprisal.
They say all contributions will be handled confidentially and forwarded to relevant authorities, including the CompCom.
Submissions can be made via encrypted email through a secure online form at scrapmetalsouthafrica@gmail.com.
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