Scrap metal resumption: Don’t celebrate yet
New scrap metal rules may deter illegal exportsTuesday, December 25, 2012
BY SHAMILLE SCOTT Business reporter email@example.com
NEW regulations for scrap metal exports may not open up the trade.
Moreover, they may force smaller players down the value chain or squeeze them out altogether, according to Jonathan Aarons.
The president of the Scrap Metal Federation in Jamaica figures that the $7-million bond now required of exporters will make it too difficult for small-scale operators to ship the collected material overseas.
"Not many exporters can afford it," said Aarons, who figures that it will eliminate persons who aren't in it for the long term.
Instead, many small scrap metal dealers may have to sell to exporters — likely at a lower price — or consolidate their operations in order to survive.
Even then, the cost of hauling the metal to one of the three sites — two in Kingston (Riverton City and Hagley Park Road) and one in Clarendon — to be operated by the Factories Corporation of Jamaica (FCJ) may make it too costly for some.
"Some are located 30 miles away from the nearest site," Aarons said.
What's at stake is an export sector which was valued at US$80 million ($7.4 billion) five years ago before it came under severe scrutiny by the Government after complaints of major theft of private and national (public) infrastructure made from metal.
The value of exports fell to as low as US$12.6 million in 2009, before making its way back to U$38.9 million last year. However, exports of metallic scrap and waste totalled US$13 million for the first six months of 2012, compared to US$22.5 million during the same period last year.
Perhaps more importantly, the industry has the potential to create 20,000 jobs directly and indirectly, albeit mostly at the lowest skill level, where scavenging, sorting and manual packing of the scrap takes place.
"The industry employs the unemployable," Aarons added.
Some persons make a living by getting old refrigerators and stoves as well as other household items that have been thrown out from households and selling it as scrap.
The other side of the coin is an estimated $1 billion in property lost to the theft over the past four years.
Telecommunications company, LIME, and the Jamaica Public Service Company (JPS), which both have miles of cables made from copper, generate industrial scrap from the retirement of obsolete metallic fixed assets.
Each year, JPS produces about 540,000 tonnes of scrap when it replaces old conductors, transformers, street light fixtures, and metres, while LIME has to constantly replace old and damaged cables.
But thieves steal the precious copper and other hot-ticket items, made from brass and aluminium, before they are retired.
JPS alone claims it lost approximately US$1 million over the past two years from the illicit activity, while LIME estimated its loss from 52 cases of vandalism at $34 million for the year so far.
"The new regime can work, but absolute focus is required and Customs and the police would have to be fearless," said Howard Mollison, vice-president, service support and delivery at LIME.
Under the new measures, restrictions will be placed on the type of scrap metal to be permitted and all containers must be loaded under the supervision of the police, Custom officers and in some cases the military.
Sanctions that will be imposed where breaches have been identified include, a $3-million fine, two years' imprisonment, and loss of licence/permit; allocation of a portion of the $7-million bond to compensate victims; and detention of material deemed suspicious for 10 days to facilitate investigations by Customs officers and the police, and public viewing.
"People will think twice, buyers will ensure that the proper checks are done," said one exporter who asked not to be named. "No one will take the risk of losing $7 million or ending up in prison if they are found in breach of the new regulations."
Aarons believes it will be extremely difficult for any contraband to be exported through the designated areas.
On the other hand, even though the new measures may deter the sellers of scrap from exporting illegally obtained material, it might not deter the thieves, by Mollison's reckoning.