In the wake of ArcelorMittal SA’s (Amsa’s) decision to shutter its Newcastle long-steel operations, ending 3,500 direct jobs and casting devastation through KwaZulu-Natal communities, Amit Saini’s recent opinion piece offers a seductive vision: pivot entirely to scrap-based mini-mills, slash emissions and unlock jobs in a circular economy (“SA’s steel future lies in scrap, not coal”, September 17).
It's a feel-good pitch, especially as global eyes turn to net-zero steelmaking. But as someone who’s spent three decades dissecting our industrial underbelly, I must push back: abandoning primary steel production — our blast furnaces that turn iron ore and coal into the lifeblood of infrastructure — isn't bold innovation; it's economic suicide.
Balanced arsenal
SA’s steel future demands a balanced arsenal, not a reckless disarmament that leaves us begging for imports while our mines rust. Saini’s scrap evangelists at outfits like Coega Steels paint mini-mills as job machines, churning out steel with 500kg-800kg of CO₂ per tonne, versus the 3,200kg from coal-guzzling blast furnaces.
Fair enough — emissions matter, and outfits like Coega Steels deserve credit for greening up with rooftop solar (785kW now, scaling to 24MW by 2026). Scrap’s abundance in urban waste streams could indeed fuel a greener loop. Yet this ignores the brutal reality of our upstream economy. Primary production isn’t just about melting ore; it’s a multiplier that sustains upwards of 100,000 indirect jobs in mining, from Sishen to Thabazimbi, where iron ore and coking coal extraction props up rural towns far from Joburg’s scrap heaps.
Every 1,000 tonnes of locally made steel injects R9.2m into GDP, spawning three direct jobs and three more in supply chains — benefits which mini-mills, reliant on recycled inputs, simply can’t match at scale. Ditching primary steel doesn’t “save” the industry; it guts it, exporting our mineral wealth raw while importing finished products at a premium. We’ve already seen crude steel output plummet 5% in 2024 to 4.8-million tonnes, with net figures even lower — why accelerate the bleed?
Jobs myth
Then there’s the jobs myth. Saini touts mini-mills’ labour intensity, and sure, they've sprouted expansions since 2013, adding about 400,000 tonnes of capacity. But these are urban-centric, favouring skilled operators in coastal hubs, while primary plants like Newcastle anchored entire ecosystems: suppliers, transporters and families in forgotten inland nodes.
The closure there isn’t abstract — it’s 37% of Newcastle’s workforce vaporised, plus tens of thousands more in knock-on effects, from truckers to tavern owners. Overall steel employment has shrunk from 26,500 in 2019 to less than 19,000 today, and favouring scrap via policies like the price preference system (PPS) and scrap export taxes has warped the market, starving primary producers of fair play.
Mini-mills claim to now produce nearly 50% of long steel, but at what cost? This dominance is a hollow boast when they export more than 400,000 tonnes of scrap-derived steel billets annually, exploiting the PPS for discounted local scrap while bypassing scrap export duties on the semi-processed output.
This “scrap 2.0" arbitrage, worth about R780m in profits, ships value abroad with minimal downstream benefits for SA manufacturing or jobs — turning a supposed local lifeline into an export loophole that undermines the very protections meant to build domestic industry.
Unsung heroes
Worse, these policies inflict deep wounds on the scrap sector’s unsung heroes: the informal collectors who form its beating heart. Since 2013, the PPS has mandated a discount of as much as 30% on domestic sales, artificially suppressing prices and siphoning R6bn-R8bn annually from collectors straight into the coffers of a handful of mini-mills. Over a decade that’s R60bn extracted from the labour-intensive informal economy, turning a lifeline for 400,000 waste pickers, township hustlers and rural traders into a bare-bones scramble.
These people — often the most vulnerable, pushing trolleys through back alleys for pennies per kilo — now face razor-thin margins that barely cover fuel or family meals, pushing some into illicit side trades or outright theft to survive. Export taxes compound the pain, slashing legal outlets and cratering scrap exports from 1.8-million tonnes in 2012 to just 156,000 tonnes in 2023 — not from scarcity but from deliberate chokeholds that benefit big players while starving the little guy. This isn’t circular economy — it’s a vicious cycle that devours the poor to fatten the few, all under the guise of “local value-add”.
High and dry
Amsa warns that mini-mills are “economically and technically untenable” as full replacements, producing lower-grade output unfit for high-end autos or rail. If we relax those protections — as some urge — domestic scrap won’t even meet demand, leaving us high and dry. And now, with Newcastle’s shutdown looming, long products prices are surging as supply tightens — yet the five to six dominant mini-mills, already pocketing about R2,000 a tonne in effective subsidies via the PPS (a hidden tax borne by scrap collectors and downstream fabricators), have wasted no time announcing hikes of R1,000-1,200 a tonne.
This isn’t market forces; it’s the entire country footing another bill to prop up these players, which just lost their predatory pricing complaint against Amsa at the Competition Tribunal on September 17. And rest assured, this isn’t the first such increase — the SA steel and engineering sectors have been held to ransom before, enriching a select few through these lopsided subsidies while the rest of us pay the price in higher costs and lost opportunities.
Don’t forget the fragile grid
Don’t get me wrong: Eskom’s blackouts have made every electron precious, and scrap’s lower energy footprint is a godsend — even as we’ve notched more than 126 consecutive days without load-shedding by mid-September. But the grid’s fragility lingers, and here’s the rub: electric arc furnaces guzzle 400kWh-500kWh per tonne, three times a blast furnace’s electrical needs, in a system that could flicker back to chaos without warning. Primary production ensures we forge our own destiny: think high-strength beams for N2 bridges or armoured plate for defence.
Mini-mills excel at rebar but can’t scale the quality or volume for a sovereign industrial base. Betting the farm on scrap amid such uncertainty is like trading a bakkie for a bicycle in a pothole apocalypse — noble, but you’ll never haul the load. Worse, full-throttle scrap reliance cedes sovereignty. We sit on the world’s sixth-largest iron ore reserves, yet risk becoming a scrap importer from China, whose dumped billets already flood our ports.
Hybrid grit
SA’s steel crisis isn’t a binary issue — scrap versus coal — but a call for hybrid grit. The department of trade, industry & competition must enforce fair policies: cap PPS distortions at 15% without delivery mandates, subsidise green retrofits for blast furnaces (hydrogen injection could halve emissions), and fast-track skills for both models.
Pour that R500m per month bailout into a national steel task force — not piecemeal props but with teeth: mandate a 50/50 primary-scrap production quota by 2027 to balance upstream muscle with downstream green.
As Newcastle families pack boxes this September, let’s not romanticise a scrap utopia at the expense of our industrial spine. Primary production built this nation; scrapping it now would break it. Time to forge ahead — together.
• Borrajeiro chairs the Recycling Association of SA.
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