Revisions to metal sector export policy needed

Indunil Hewage

The private sector emphasizes the need to revisit metal sector policy while studying its strengths to mitigate weaknesses for economic development. The Government banned scrap metal imports in October 2010 for six months. The ban imposed in October for six months is still continuing.

Agriculture Machinery Manufacturers Association Chairman Melvin Samarasinghe said iron, copper and aluminium are mainly benefiting from the ban.

The largest contribution is being made by the steel industry which produces over 15,000 tonnes per month to the value of Rs 1.5 billion per month and the value addition is over 50 percent of the London Metal Exchange (LME) scrap value.

He said copper industry value addition for export of copper rods was lower than the LME scrap price in October 2010.

This value addition has been 50 percent lower than the local industry value addition, which is, plus 40 percent to LME copper price even when compared with a simple product like a brass hinge. The ban on copper has therefore helped the local industry but today there is no brass scrap for the local industry as this has leaked out of the country through other channels.

Samarasinghe said the aluminium industry value addition was worse due to non segregation of scrap but after the ban the segregation of scrap commenced and the value of locally produced aluminium using scrap extrusions increased by 20 to 30 percent which is plus 50 percent of the LME price benefiting locals.

“This needs to be streamlined after closing the gaps,” he said.

“There should be a transparent system for import and export of raw material benefiting local value addition for economic development.

The policy should be free from regular revisions therefore the best and the simple way out is to use the globally existing HS Codes for export of finished metal goods and to facilitate import of raw material for the local industry. The export of any value added metal products should be at least 20 percent more than the LME based metal prices as any of our imports of finished goods are not less than the global raw material price,” Samarasinghe said.

Exporting value added finished goods will definitely benefit economic development, productivity and employment generation as these items could also be further value added to electric cable, electrical contacts, springs and screws which could help many more industries.

“In applying to the metal sector we are paying the value of material of different products which is sometimes cheaper but not buying the complete product with its deliveries. Our machinery users are getting blunt day by day and we are becoming more dependent on other countries.

We are now contributing to adding value to industries in other countries than our own country. If we continue this process we will have to close local metal industries,” Samarasinghe said.