Minister Tau issued a policy directive to ITAC instructing them to review the Price Preference System (PPS) on scrap steel. The PPS is a sneaky subsidy programme which forces generators of scrap metal to subsidise the consumers of scrap metal by giving them cheap raw material. Currently the PPS discount on scrap steel is 30%, which I think you would agree is quite a lot.

The review of PPS is long overdue. I am not a lawyer so let me speak plainly. PPS needs to be removed, but if that doesn’t happen, it should materially reduce.

Be sure to book your spot here for our FREE scrap steel webinar on 13 May 2025 at 09:30

Around R8.5 billion is being transferred every year from the scrap generators, mostly manufacturers, construction companies, mines, state-owned enterprises (SOEs) and of course your own household scrap, collected by 200 000 waste pickers. This subsidy has been in place since 2013 and combined with export duties and R14 billion of friendly finance from IDC, has resulted in a plethora of mini-mills. This is viewed as a good thing until you look at the collapse of the steel price for long steel. Now we have ArcelorMittal South Africa (Amsa) wanting to close their Newcastle business because they can’t compete with the mini-mills.

This is not a success story. It’s a bubble and it busy bursting. Write-offs will happen, either at Amsa or at the mini-mills, and short of demand drastically increasing, this appears inevitable. The IDC, with its incredibly high pain threshold, will write off even more.

Interested parties have until 22 May to respond.

If you want to see PPS drop you should obviously contact us at info@xagta.com to find out how we can help you.