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Scaw Metals November 2014 Coverage Report

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SA Mining

01 October 2014, p.22

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Tame Times

30 October 2014, p.12

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Mining Weekly

31 October 2014, p.46

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Engineering News

31 October 2014, p.35

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Business Day

14 November 2014, p.8

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Business Day

17 November 2014, p.8

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ONLINE

Engineering.co.za

Unabated export of scrap is ‘economic sabotage’

21 November 2014

http://www.engineeringnews.co.za/article/unabated-export-of-scrap-is-economic-sabotage-2014-11-21 Government’s aspirations to raise beneficiation levels, once implemented, would certainly be a

massive leap towards stemming the tide of the deindustrialisation South Africa has witnessed in

recent years. As a country, our relative competitive advantage has deteriorated sharply, given a

series of factors. The global financial crisis spurred a new level of competitiveness globally.

Sadly, South Africa’s competitiveness continues to slip, based on countless reports and media

articles.

The reality of this is clearly evident in the steel manufacturing industry. The cost of key inputs into

the manufacturing process continue to grow at a pace beyond that experienced by our international

competitors. Our labour climate, while challenging, fails to make vital productivity gains necessary to

normalise wages gains. Energy costs are set to continue growing at an alarming rate.

Scrap steel, the key raw material ingredient for the South African mini-mill and foundry industry, is

also ‘technically’ in short supply. While there is ample steel scrap locally, the short supply is driven

by vast exports of the material to mainly India and Pakistan. The resultant shortage has fuelled local

prices of scrap material, thus further impeding the country’s manufacturing competitiveness.

Given industry cries and the obvious quantum of scrap exports, government introduced the

Preferential Pricing System (PPS) in 2013, an attempt to limit the export of both ferrous and

nonferrous scrap. Against industry pleas of an outright ban on the export of scrap or at least an

export tax, government chose to implement the PPS. To date, the PPS has proved ineffective in

limiting the export of scrap material. Fresh amendments to the PPS currently being considered are

pointless as scrap material exporters will continue to circumvent the regulations, as is presently the

case.

The ferrous and nonferrous manufacturing industry has been quick to realise that a radical change of

its mindset is necessary to ensure future sustained competitiveness. As a result, investment in skills

and equipment has increased substantially. These efforts are negated by our country’s policy on raw

material exports being essentially the inverse of those of other developing nations. The majority of

our Brics (Brazil, Russia, India, Chinaand South Africa) and Southern African Development

Community counterparts have introduced firm policies either taxing or banning the export of scrap

material.

The outright ban of exports from South Africa will undoubtedly create a huge surplus scrap material

locally. The resultant effect would translate into substantially reduced prices, thus providing a vital

source of competitive advantage for the growth of an industry that could easily beneficiate this

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material into secondary value-added products. Much of the equipment needed to beneficiate this

scrap presently stands idle, while South African manufacturers are unable to even climb onto the

first ladder rung towards improved competitiveness. Given the closure of more than 200 foundries

in South Africa since 2003, the bulk of their previously beneficiated output now streams in from

countries such as Australia, Canada, China, Malaysia, India and China.

While we all loudly voice our aspirations of raising beneficiation levels, it is frustrating that the basic

low-hanging beneficiation opportunities within the ferrous and nonferrous

scrap manufacturing sector are stifled by a lack of a firm policy similar to those of our international

trading partners. The beneficiation of competitively priced scrap material is undoubtedly the easiest

beneficiation opportunity that can quickly yield much-needed jobs and at least tame the aggressive

importation of basic products produced from scrap.

Alone, the revival of just a handful of foundries in South Africa will boost a myriad of businesses

linked in terms of the supply of services, consumables and further downstream processing.

While the vast export of scrap material from South Africa erodes the easiest beneficiation

opportunities, our economy suffers a secondary related hardship of the unprecedented theft of

scrap material to fuel the supply of scrap material to export merchants.

The landscape and economy across the country has been ‘scared’ with the theft of copper cables,

highway crash barriers, drain covers and more. Many refer to this theft as “economic sabotage”.

However, surely the real economic sabotage is the unabated export of scrap material.

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Germistoncitynews.co.za

A Woman of Steel

22 November 2014

http://germistoncitynews.co.za/74112/a-woman-of-steel/

Bathabile Mosala has realised her career dreams at local company Scaw Metals Group.

For the Scaw Metals Group’s computer training instructor, Bathabile Mosala, being a teacher was

something she always dreamt about and aspired to be.

“What I have come to realise during my tenure at Scaw, while working in the training department, is

that there’s always a need for one to upgrade one’s skills and knowledge,” she said.

“For me, this means that I have to study constantly to be a step ahead of the students.

“I enjoy the challenges that my job brings; it enables me to meet new people, conduct my training

sessions and see the necessary results.

“I am motivated to do more when I see improvement from the students.

“These students come to the computer class without any computer knowledge and they leave as

different people after training.”

Born and raised in Dube Village, Soweto, Mosala was the youngest of four siblings and the only

daughter of her doting parents, Gladys and the late Sello Mosala.

True to her name, which means “Happy”, Mosala describes herself as a spirited, compassionate

woman with an enquiring mind and a thirst for knowledge.

She began her schooling at Sizanani Primary School, progressing to Vukayibambe Higher Primary

School and finally completing Grade 12 at Langlaagte Technical High School.

Mosala later attended Innovation Business School, where she completed a computer course and

achieved outstanding results.

Having been identified for her potential and dedication, she was then employed by the school as a

computer tutor for two years.

Seeking a change of environment, Mosala registered her curriculum vitae (CV) with a recruiting

agency and received and accepted temporary assignments at various companies, including Donn

Products, Comair and Johnson Matthey.

In 2001, she was assigned to Scaw Metals as an engineering clerk, once again proving her mettle

through her diligence and dedication.

She was permanently appointed by Scaw Metals in July 2002.

But she didn’t stop there; consistent delivery and achievement saw Mosala climb steadily up the

ranks to production administrator in 2004 and to Scaw’s computer training instructor in 2005.

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Seeing this as her opportunity to finally realise her childhood dream of being a teacher, Mosala

registered with Unisa for a diploma in human resource management, to build a solid educational

foundation and maximise the value she adds to the lives of her trainees.

Mosala recognised the important role training plays in the development of skilled labour within the

mining and metalwork industries.

“At Scaw Metals, our motto is being about more than just steel, great emphasis is placed on our

people and their development; for a company to be outstanding, skilled labour is needed,” she said.

Along with her career aspirations of progressing into the role of a training consultant within the next

five years, Mosala also demonstrates a passion for gender equality in the workplace.

“Women need to be upskilled and given opportunities to balance gender inequality in the metal

industry,” she said.

“Women at Scaw Metals are encouraged and supported to work towards their career aspirations, no

matter how difficult, unconventional or impossible they seem.”

When asked about her greatest achievement at Scaw, a proud Mosala said: “My greatest

achievement was when we obtained the accreditation through MICT Seta to offer computer training

to the employees and playing my role in Scaw’s latest and most unique achievement of obtaining

CESA accreditation for our Haggie Steel Wire Rope product training course.”

According to Mosala the key ingredient to a successful career is choosing something you enjoy

doing.

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Ujuh.co.za

Hulamin and BEE groups set to take over casthouse

24 November 2014

http://www.ujuh.co.za/hulamin-and-bee-groups-set-to-takeover-bayside-casthouse/ IDC’s indirect exposure into the Bayside casthouse alongside BEE players will grow the list which

already includes Scaw Metals Group and Palabora Mining Company.

A black economic empowerment (BEE) styled entity powered by Hulamin and indirectly the

Industrial Development Corporation (IDC) is taking over BHP Billiton’s Bayside casthouse in Richards

Bay.

The deal comes to clear part of the dark cloud hovering over Richards Bay following the decision by

BHP Billiton to halt aluminium production from the Bayside smelter.

A consortium called Isizinda Aluminium is buying the Bayside value added product (VAP) casthouse

which comes with , a R10 billion liquid metal supply contract, 17 hectares of land, equipment and

the adjacent buildings associated with the casthouse.

The consortium is made of Bingelela Capital (60%) and Hulamin (40%). It was selected as the

successful bidder following a competitive bidding process. The BHP Billiton statement said Bingelela

Capital comprises four 100% black-owned companies and has 52% female representation. Whereas

the JSE-listed Hulamin, which is headquartered in Pietermaritzburg, is currently the casthouse’s

biggest customer and is the largest semi-fabricator of aluminium products in Southern Africa.

BHP Billiton said the transaction is still subject to regulatory approval, and other customary

conditions, and is expected to be completed in the first half of calendar year 2015. The statement

noted that upon completion of the transaction, and following the closure of the Bayside smelter

earlier this year, BHP Billiton will no longer produce aluminium from Bayside.

The sale agreement was signed by Graham Kerr, Chief Executive Officer Elect of the new company

which would be created by BHP Billiton’s proposed demerger. BHP Billiton’s integrated aluminium

business has been selected for inclusion in the new company.

Kerr said: “The sale of the casthouse to Isizinda Aluminium reflects our vision to grow the

downstream aluminium industry in South Africa and to contribute to the transformation of the

economy of Richards Bay. We recognise the importance and significance of this agreement and are

committed to working hard to fulfil our obligations for the success of the downstream aluminium

industry.”

The landmark sale of the casthouse follows the closure of BHP Billiton’s Bayside smelter in June

2014. Following the closure of the smelter, the casthouse continued to operate with the supply of

liquid metal from the nearby Hillside smelter.

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The agreement with Isizinda Aluminium involves the continuous supply of 96,000 tonnes liquid

metal per annum for a period of five years from the adjacent Hillside smelter to the Bayside VAP

casthouse.

Both parties are actively studying the potential for expansion of the VAP casthouse beyond its

current capacity to create a larger downstream aluminium industry within South Africa. If

progressed, such projects are expected to come into fruition over the next few years and would be

beneficial for the downstream aluminium industry and the Richards Bay economy.

“In line with our commitment to transformation and empowerment, and our recognition of the

critical importance of the VAP casthouse as a downstream operation, we believe that the

composition of the successful Isizinda Aluminium consortium is ideal,” said Kerr.

“We recognise the importance and significance of this agreement and are committed to working

hard in fulfilling our obligations as required for the success of this agreement, and which is in line

with our vision for the sustainability and growth of the downstream aluminium industry.”

The IDC, a major Hulamin shareholder, seems to have been positioned to snap up mining assets

which are being dropped by mining majors like BHP Billiton, Rio Tinto and Anglo American. IDC’s

indirect exposure into the Bayside casthouse alongside BEE players will grow the list which already

includes Scaw Metals Group and Palabora Mining Company.

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BDlive.co.za

COMPANY COMMENT: Mr Price; ArcelorMittal SA

27 November 2014

http://www.bdlive.co.za/companies/2014/11/27/company-comment-mr-price-arcelormittal-sa

MR PRICE seems best placed among SA’s retailers as we head into a holiday season that is shaping

up to be another torrid one for traders as disposable incomes remain crimped by rising costs and

personal debt.

The budget-friendly retailer has shown some weakness in its home chains, such as Sheet Street, but

that was to be expected as they are targeted towards the low income bracket. Sales are also flat at

Mr Price Home, but people tend to shift spending away from homeware in tough times.

The group’s core business has remained resilient, though, while peers such as The Foschini Group

and Truworths, which adopted a more cautious approach to credit, are battling high levels of

consumer indebtedness.

Over the years Mr Price has invested in quality and focused on a fast-fashion model to stay on top of

trends, and this has seen it snatch market share from rivals. It also positioned itself through

marketing campaigns as a cheap and chic retailer aimed at the younger, hip and fashion-conscious

market. Management insists the group hasn’t been a beneficiary of shoppers trading down, but

analysts say otherwise.

In Mr Price’s favour is the fact that ailing Edgars can’t offer any more credit due to Absa, which owns

its book, closing the tap. And Truworths keeps getting merchandise calls wrong.

Shoppers who are watching household budgets are therefore either shopping at Mr Price or

Woolworths, which has a "Good, better, best" tiered strategy that caters to a range of income

groups.

ARCELORMITTAL SA’s announcement a week ago that it is urgently attending to "unforeseen delays"

in restarting its recently relined Newcastle works blast furnace has annoyed some of its customers.

One small producer that transforms wire rod it gets from ArcelorMittal SA into various wire

products, says the group’s claim that it will "ensure delivery to most customers" throughout next

month is a "sugar-coated pill".

Some smaller steel beneficiators have not received any raw material inputs from the country’s

premier steel producer for two weeks. And they now expect sporadic supply to continue well into

next year.

"This outage affects wire rod in our business, which is at the busiest time of year … part of our plants

and others will be standing come the first week of December," the small producer says. "All

companies then shut on (the) 12th December for three to four weeks, so the product is of no use to

these types of businesses if it is delivered after then."

SA only has three producers of wire rod: ArcelorMittal SA, Scaw Metals and Cape Gate. The last

mentioned has downstream wire manufacturing operations, so production of wire rod is largely for

its own consumption

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Bizcommunity.com

2014 EXSA Awards winners for the "Oscars" of the industry!

29 November 2014

http://www.bizcommunity.com/Article/196/11/122012.html

Mixed finalists

The Exhibitionist for The Exhibitionist stand at Meetings Africa

3d Design for the Scaw Metals stand at Electra Mining

3d Design for the Thyssenkrupp stand at Electra Mining and

Progroup for the Whirpool stand at Homemakers Gauteng

The winner: 3d Design for Thyssenkrupp at Electra Mining

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Engineeringnews.co.za

Domestic ferrous scrap consumers say price preference system is not working

28 November 2014

http://www.engineeringnews.co.za/article/domestic-ferrous-scrap-consumers-say-price-preference-

system-is-not-working-2014-11-28

There is widespread consensus that the Price Preference System (PPS) –introduced in September

2013 to restrict the export of scrap metal before it had first been offered for sale to the domestic

consumers at a 20% discount to an international benchmark price – has not been effective. There is

also little optimism among ferrous scrap recyclers and consumers alike that proposed changes to the

PPS will improve the outlook for the pricing and availability of scrap metal.

The International Trade Administration Commission of South Africa (Itac), which administers the

PPS, has published amendments to the policy guidelines, including one proposing an increase in the

price preference rate for steel andstainless steel scrap from 20% to 30%.

Itac senior manager for import and export control Philip Snyman tells Engineering News Online that

the policy guidelines are designed to improve the effectiveness and administration, as well as

address “certain shortcomings that were identified in the original guidelines”.

But ferrous scrap consumers remain unconvinced that changes to the PPS will be sufficient to

materially improve either domestic availability or pricing of scrap metal.

Scaw head of operations Steve van Wyk says “very little” has changed since the introduction of the

PPS.

He tells Engineering News Online that the scrap industry has found ways to circumvent the

regulations, “by taking advantage of commercial terms not being specified in the PPS and by

demanding unreasonable and onerous conditions in the negotiation process, to ensure that no

agreement is possible”.

The South African Iron and Steel Institute (SAISI) warns that access to good-quality local scrap is

being hampered and the primary steelmills are experiencing difficulty in procuring material under

the current Itacguidelines.

ArcelorMittal South Africa (AMSA) confirms this view indicating that, while the system has been

designed with good intentions, it has failed to achieve the desired objectives.

“The export of scrap is now even more aggressive than before the regulation was promulgated. In

our view, decisive action needs to be taken to restrict the export of scrap,” AMSA

tells Engineering News Online.

South African Institute of Foundrymen CEO John Davies agrees that there has been little or no

impact.

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But he also stressed that the foundry industry is in a different position to the steel mills, owing to the

fact that most foundries use only a few grades of material, which are not usually seen on the permit

application lists.

“So it is suspected that foundry grades are mixed with lower grades to ‘sweeten’ them and exported

in this way rather than being available to the foundry industry,” Davies tells Engineering News

Online.

He highlights a recent example, where foundry suitable material was listed on the export permit

application list, but a member foundry could not reach the applicant by any means within the

prescribed period, so the opportunity was lost.

“Other tactics are that the purchase prices and terms are not agreed and therefore the permit is

issued as well as the price quoted being an ex-works price making collection impossible. In some

instances scrap is melted locally and exported as billets, and so by-passing the permit

application system.”

ALTERNATIVE INTERVENTIONS

SAISI reports that its members have made representations to Itac to raise their concerns with the

PPS and to suggest alternatives.

Scaw’s Van Wyk believes a more equitable and simple model would be to place a tax, or levy, on

each application for an export permit. The levy could be calculated as a certain percentage of the

international benchmark price and be payable to the South African Revenue Service on the issuance

of the export permit.

AMSA argues that an export duty system would be the easiest to implement and should encourage

local sales.

Davies is less prescriptive, but argues that the intention of making scrap material available at a lower

cost to local consumers is “patently not working for the ailing foundry industry”. For this reason, an

alternative mechanism should be sought to improve supply and enforce a discount, while “ensuring

that the margin of the recycler is not diminished and that employment levels are not reduced”.

AMSA is equally concerned about the fact that the PPS disadvantages scrap merchants that sell to

domestic steel mills, as there is a natural resistance to selling at a lower price. “If one scrapyard

decides to export and another decides to sell to the domestic foundries, how will the one selling to

the domestic market ever be able to compete in collecting scrap, when they are at a 20%

disadvantage?”

Davies suggests more implementable mechanisms are available, pointing to remedies outlined in the

Conningarth Report tabled two years ago. He argues, too, that an outright banning of scrap exports

could be considered, but is likely to have unintended consequences for collections and recycling

sector jobs.

Metal Recyclers Association (MRA) chairperson-elect Quintin Starkey agrees that the PPS has not

been effective. “To our knowledge none of the major consuming works subscribe to the PPS. The

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fundamentals on which the PPS was formed is flawed,” Starkey argued, while dismissing arguments

that the scrap industry has found ways to circumvent the regulations.

“The current system is not working and the MRA believes that the proposed changes will have little

or no effect,” Starkey adds, warning that export taxes and/or export bans would be contrary

to South Africa’s World Trade Organisation commitments and would place further strain on the low-

margin recycling sector.

“The MRA continues to seek a platform whereby role-players in the industry can discuss various

stumbling blocks with the PPS – of which there are many,” he adds.

Starkey also makes specific reference to the Conningarth Report, which tested various intervention

measures and where the results were vetted by both the recycling and consuming industry.

The report cautions against directly controlling the export of scrap, warning that such a move could

negatively affect the foundry andscrap metal industries. “Imposing physical quotas will have a

positive financial effect on the foundry industry, but will lead to job losses. Export price control by

means of export taxes or other means will have a negative financial as well as negative direct

employment effect.”

The intervention scenario proposed for ferrous scrap is to promote the local production of castings

by “paying a supply grant to thescrap metal recyclers per tons supplied to the foundry industry”.

Itac’s Snyman could not be drawn, though, on persistent calls by scrap consuming sectors for an

overhaul of the PPS in favour of either a tax or an outright ban on the exportation of ferrous scrap.

“Itac is the administrator of policy and therefore obliged to administer any other policy directive it

may receive,” Snyman explains, noting that the issuance of export permits for metal is conducted in

line with Section 6 of the International Trade Administration Act, 71 of 2002.

However, SAISI argues that an urgent resolution to the issues around the PPS should be found “as

domestic consumers continue to remain subject to highly irregular scrap supplies, leading to

seriously detrimental consequences”.

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Broadcast Station: Power FM Program: Power Lunch Date: 26 November 2014 Time: 00:01:39