January Coverage Report

PRINT

Sowetan Soccer

01 January 2016, p.108

Business Day,Companys and Markets

11 January 2016, p.5

Business Day,Companys and Markets

22 January 2016, p.6

Beeld Eienedomme &Veilings

29 January 2016, p.21

ONLINE

Bdlive-Business Day Live

11 January 2016

Articllink:http://www.bdlive.co.za/business/industrials/2016/01/11/sars-adds-to-evraz-

highvelds-troubles

AN AUDIT letter from the South African Revenue Service (SARS) indicating that SA’s second-largest

steelmaker owes tax worth R680m between 2007 and 2009 has further complicated its potential sale

to Hong Kong-based metals interests.

But the joint business rescue practitioners of Evraz Highveld Steel and Vanadium say despite the

"additional tax assessments" they "remain of the view" there is a reasonable prospect of rescuing the

company, even as it missed another business rescue proceedings deadline.

"(In November), the company received a finalisation of audit letter from SARS … whereof SARS advised

that it had finalised its audit in respect of the company’s income tax for the 2007 to 2009 tax period,"

Highveld said last week.

However, joint business rescue practitioners Piers Marsden of Matuson & Associates and Daniel

Terblanche of Mazars have formally requested SARS to provide "detailed reasons for reaching the

decision to issue the aforesaid additional assessments", as provided for in the Tax Administration Act.

In April last year, Evraz Highveld applied for its JSE listing to be suspended as it could no longer

continue as a going concern. Highveld’s creditors have accepted a R350m offer by Hong Kong company

International Resources Project to buy about R1.2bn of the company’s debt in two tranches.

Additional potential liabilities were earlier estimated to reach R1bn including for environmental

cleanup costs and taxation issues.

The SARS letter comes as the company’s London-listed parent has instituted several court challenges

in recent months to annul the sale. It claims the terms of disposal are not in the best interests of

Highveld nor the economic prospects of the Emalahleni region in which it operates.

The Russian-backed Evraz group in the UK initially challenged the fact that creditors of Highveld’s 74%-

owned Mapochs magnetite iron ore mine in Limpopo voted in favour of the mine’s separate business-

rescue plan. The mine supplies Highveld with vanadium-bearing ore and is seen as critical to the

company’s own business-rescue proceedings.

But Evraz later said amendments to the mine’s plan attended to its concerns and it dropped the

application.

The SARS bombshell comes after the South African Iron and Steel Institute, representing steelmakers

ArcelorMittal SA, Cape Gate and Scaw Metals Group, applied to the International Trade Administration

Commission of SA for an increase in duties on steel wire rod and reinforcing bar widely used in

construction materials.

Evraz Highveld has applied separately to the commission for an increase in the rate of customs duty

on structural steel.

SARS, the state-mandated Industrial Development Corporation and the National Union of

Metalworkers of SA have opposed the court proceedings instituted by Evraz subsidiaries East Metals

and Mastercroft to declare Highveld’s business rescue plan invalid.

The business rescue-practitioners also said that despite the Department of Economic Development

not being a party to this litigation, the entity had expressed its opposition to the main application to

invalidate the sale to International Resources Project.

Bizcommunity.com– Biz Community

12 January 2016

Article link: http://www.bizcommunity.com/Article/196/710/139222.html

An audit letter from the South African Revenue Service (SARS) indicating that SA's second-largest

steelmaker owes tax worth R680m between 2007 and 2009 has further complicated its potential

sale to Hong Kong-based metals interests

But the joint business rescue practitioners of Evraz Highveld Steel and Vanadium say despite the

"additional tax assessments" they "remain of the view" there is a reasonable prospect of rescuing

the company,even as it missed another business rescue proceedings deadline.

"(In November), the company received a finalisation of audit letter from SARS ... whereof SARS

advised that it had finalised its audit in respect of the company's income tax for the 2007 to 2009 tax

period," Highveld said last week.

However, joint business rescue practitioners Piers Marsden of Matuson & Associates and Daniel

Terblanche of Mazars have formally requested SARS to provide "detailed reasons for reaching the

decision to issue the aforesaid additional assessments", as provided for in the Tax Administration

Act.

In April last year, Evraz Highveld applied for its JSE listing to be suspended as it could no longer

continue as a going concern. Highveld's creditors have accepted a R350m offer by Hong Kong

company International Resources Project to buy about R1.2bn of the company's debt in two

tranches.

Additional potential liabilities were earlier estimated to reach R1bn including for environmental

cleanup costs and taxation issues.

The SARS letter comes as the company's London-listed parent has instituted several court challenges

in recent months to annul the sale. It claims the terms of disposal are not in the best interests of

Highveld nor the economic prospects of the Emalahleni region in which it operates.

The Russian-backed Evraz group in the UK initially challenged the fact that creditors of Highveld's

74%-owned Mapochs magnetite iron ore mine in Limpopo voted in favour of the mine's separate

business-rescue plan. The mine supplies Highveld with vanadium-bearing ore and is seen as critical

to the company's own business-rescue proceedings.

But Evraz later said amendments to the mine's plan attended to its concerns and it dropped the

application.

The SARS bombshell comes after the South African Iron and Steel Institute, representing steelmakers

ArcelorMittal SA, Cape Gate and Scaw Metals Group, applied to the International Trade

Administration Commission of SA for an increase in duties on steel wire rod and reinforcing bar

widely used in construction materials.

Evraz Highveld has applied separately to the commission for an increase in the rate of customs duty

on structural steel.

SARS, the state-mandated Industrial Development Corporation and the National Union of

Metalworkers of SA have opposed the court proceedings instituted by Evraz subsidiaries East Metals

and Mastercroft to declare Highveld's business rescue plan invalid.

The business rescue-practitioners also said that despite the Department of Economic Development

not being a party to this litigation, the entity had expressed its opposition to the main application to

invalidate the sale to International Resources Project.

Mineweb.com – Mineweb

12 January 2016

Articlelink:http://www.mineweb.com/news/industrial-metals-and-minerals/competition-

tribunal-to-hear-imerys-andalusite-case-today/

The Competition Tribunal will convene on Tuesday to hear arguments for and against the proposed

merger of Imerys South Africa and Andalusite Resources, which has raised objections from consumers

of andalusite that include the likes of ArcelorMittal, Scaw and Evraz Highveld Steel.

According to a Competition Tribunal press release, andalusite forms part of the alumina-silicates group

of compounds that possess heat resistant properties and are widely used in high-temperature

industrial processes eg in furnaces, kilns, crucibles, and ladles, which require refractories for steel,

cement, aluminum, and glass applications. With the exception of andalusite and chamotte, all other

alumina-silicates are not mined in South Africa and are imported from countries such as China, France,

Brazil, USA, Russia, Australia and Germany.

The Competition Commission will argue against the merger because the two parties are close

competitors and the transaction would remove the competitive dynamics between the two

companies and would lead to a situation where the merged entity will enjoy market power – the ability

to influence the price of the commodity.

The commission believes the proposed remedies that have already been deliberated on will not affect

the outcome

Bdlive.co.za– Business Day Live

22 January 2016

Articlelink:http//www.bdlive.co.za/national/2016/01/22/tribunal-to-hear-from-cape-gate-in-

wire-cartel-case

CAPE Gate chief operating officer Barend Nicolaas Coetzee will take the stand at the Competition

Tribunal on Friday in the Allens Meshco wire case.

One issue expected to be raised by Cape Gate is the dispute over the length of time the alleged

collusive tendering, price-fixing and market division took place. This could affect the penalties imposed

on the companies concerned.

In January 2007, the commission referred a cartel case to the tribunal against Allens Meshco,

Wireforce Steel Bar Hendok, Independent Galvanising, Galvwire and Meshrite, alleging that the

respondents directly or indirectly fixed a purchase or selling price in respect of lightly galvanised wire,

nails, wire and various wire products.

In July 2008, Consolidated Wire Industries (CWI), a subsidiary of Scaw, admitted that its employees

had participated in price-fixing meetings with their competitors Cape Gate, Allens Meshco and

Hendok. They agreed on a national price list for wire and wire products, on adjustments to the price

list and on collusive tendering of cable armouring wire. CWI applied for leniency.

CWI and Cape Gate are alleged to have also agreed not to target each other’s customers.

Evidence gathered by the commission confirms that, from 2001 to 2008, the respondents contravened

the Competition Act by engaging in price-fixing, market allocation and collusive tendering.

Polity.org.za – Polity

29 January 2016

Articlelink:http://www.polity.org.za/article/big-scrap-looms-over-proposed-new-scrap-export-

rules-2016-01-29

South African scrap merchants and domestic scrap consumers are taking strongly opposing positions

regarding proposed amendments to the price preference system (PPS) policy guidelines, which will

govern the future exportation of ferrous and nonferrous scrap metal. The proposed changes were

published by the International Trade Administration Commission of South Africa (Itac) in the

Government Gazette of December 11 and are open for public comment until February 5. The

amendments seek to align the PPS with the Second-Hand Goods Act and government’s black economic

empowerment policy, while also tightening up permit application and administration processes, right

down to a stipulation of the times at which PPS-related transactions can be concluded. In addition,

Itac has included a clause specifying that all metal scrap be exported through a single harbour, with

Port Elizabeth having been designated for the purpose. PUNITIVE & ONEROUS The Metal Recyclers

Association (MRA), which has over 100 scrap-dealer members representing 70% of the market by

volume, is objecting to the proposed changes, describing them as “punitive”. It has also written to

Economic Development Minister Ebrahim Patel requesting an urgent meeting to canvass alternatives.

MRA chairperson Quintin Starkey tells Engineering News Online that the PPS has been progressively

tightened since its introduction in 2013 and that the proposed changes will have serious unintended

consequences. They will result, he argues, in a further decline in scrap prices, which will place

additional pressure on its members, through continued job losses and business closures. The proposed

changes will also jeopardise the livelihoods of tens of thousands of informal scrap-metal traders – the

MRA estimates there to be 400 000 such traders, who support as many as 1.8-million dependants. He

says they are also inappropriate in the context of a yearly ferrous scrap surplus, which the MRA

estimates at between 1-million and 1.5-million – the domestic industry collects about 3.5-million tons

a year, of which the consuming industry only trades in 1.5-million tons. The “onerous” requirement of

insisting on all scrap being exported through Port Elizabeth would also add about R700/t to transport

costs, which would be passed on to the generators of scrap in the form of lower prices. The Road

Freight Association (RFA) also objects to the designation of Port Elizabeth as the sole port of export,

arguing that it could negatively affect the viability of hauliers. Road freight operators, the RFA argues,

are typically able to rely on a return leg from Durban when transporting scrap from the interior of the

country. However, there is now a serious risk of the return trip from Port Elizabeth becoming a “dead

leg”, which could result in some hauliers closing down. However, Itac spokesperson Foster Mohale

argues that a designated port has many benefits and will contribute towards the objectives of

improving the administration of the system. The proposed tightening of the PPS system – introduced

primarily to improve domestic scrap availability and facilitate a 20% to 30% discount to export prices

for local consumers – is broadly supported by scrap consuming industries, frustrated by the fact that

the PPS is currently being bypassed by the scrap sector. IN SUPPORT OF TIGHTENING Non-Ferrous

Metal Industries Association of South Africa chairperson Bob Stone tells Engineering News Online that

the majority of its members are supportive of a further tightening of the PPS guidelines, as there are

currently too many loopholes. Government introduced the discounts and a restriction that scrap could

not be exported before first being offered to domestic consumers in favour of introducing an export

duty, or banning scrap exportation entirely; a measure that has been introduced in a number of other

countries to shore up domestic supply. But Stone says he has yet to come across a member firm that

has successfully negotiated the discounts initially anticipated when the system was introduced. Scaw

Metals CEO Markus Hannemann adds that the proposed amendments should also be viewed in the

context of the overall objectives of the PPS, which is to ensure the “steady supply of quality scrap

material to local users at a price that is reasonable in order to support local industry”. Hannemann

argues that that objective is currently not being met and that the Itac intervention is designed to try

walk a middle road between an outright ban and continuing to sustain an export channel that is

aligned to the beneficiation goal. Scaw, therefore, supports the proposed changes and also believes

that the steel and engineering sector will benefit from the new policy, by securing current jobs and

levelling a playing field currently made uneven by the large scale export of quality scrap. Starkey

acknowledges that the PPS is not working as envisaged, but also questions whether it is the best

instrument for meeting government’s aims. CONSULTATION NEEDED? “Our appeal to government is

to have a proper roundtable consultation with all industry stakeholders on the proposed amendments

and the PPS system in its entirety,” he says, stressing that the MRA is keen to be part of a

“constructive” solution. “We need a platform through which to engage government and other

industries to find a solution to the problem.” Steel and Engineering Industries Federation of Southern

Africa (Seifsa) chief economist Henk Langenhoven says further dialogue is probably necessary, as the

proposals outlined in the Gazette do appear onerous. He also cautions that there are often negative

outcomes even when new regulations are well intentioned. He says Seifsa remains concerned about

the availability and pricing of scrap, which is affecting the competitiveness of domestic industry. “This

is an attempt to plug the holes and stop the circumvention of the initial guidelines,” Langenhoven

explains. “My worry, as an economist, is that the new rules are so onerous that it might stop

international trade completely.” Others are dubious about whether further dialogue will yield a

solution, particularly in the context of a material trust deficit that has developed, largely as a result of

what is perceived to be the scrap industry’s ongoing circumvention of the PPS. “Discussions on this

issue have been ongoing since around 1998. The conclusion in most of those meetings is that industry

needs assistance –we are becoming uncompetitive, we are closing, we are losing jobs,” Stone says.

“So we can go on talking for another 10 or 15 years, but by then the industry, which is already only

half of what it was, will be no longer . . . and we will become totally deindustrialised.” Itac’s Mohale

confirms that the reason for the proposed amendments is to improve compliance and enforcement.

“Improved, effective administration will support the objectives of the PPS to provide the necessary

input material which will ensure internationally competitive beneficiation of scrap metals by the local

consuming industry,” he says. Mohale says the notice forms part of the consultation process and

stresses that all comments will be “duly considered”. “Should a need for further information arise,

relevant parties will be approached. The recommendations will be submitted to the Itac for

consideration after which the amendments will bepublished.

Engineeringnews.co.za - Engineering News

29 January 2016

Articlelink:http//www.engineeringnews.co.za/article/big-scrap-looms-over-proposed-new-scrap-

export-rules-2016-01-29

South African scrap merchants and domestic scrap consumers are taking strongly opposing positions

regarding proposed amendments to the price preference system (PPS) policy guidelines, which will

govern the future exportation of ferrous and nonferrous scrap metal. The proposed changes were

published by the International Trade Administration Commission of South Africa (Itac) in the

Government Gazette of December 11 and are open for public comment until February 5. Print Send

to Friend 2 3 The amendments seek to align the PPS with the Second-Hand Goods Act and

government’s black economic empowerment policy, while also tightening up permit application and

administration processes, right down to a stipulation of the times at which PPS-related transactions

can be concluded. In addition, Itac has included a clause specifying that all metal scrap be exported

through a single harbour, with Port Elizabeth having been designated for the purpose. More Insight

Metals and engineering sector still under strain Metals and engineering sector still under strain

PUNITIVE & ONEROUS The Metal Recyclers Association (MRA), which has over 100 scrap-dealer

members representing 70% of the market by volume, is objecting to the proposed changes, describing

them as “punitive”. It has also written to Economic Development Minister Ebrahim Patel requesting

an urgent meeting to canvass alternatives. MRA chairperson Quintin Starkey tells Engineering News

Online that the PPS has been progressively tightened since its introduction in 2013 and that the

proposed changes will have serious unintended consequences. They will result, he argues, in a further

decline in scrap prices, which will place additional pressure on its members, through continued job

losses and business closures. The proposed changes will also jeopardise the livelihoods of tens of

thousands of informal scrap-metal traders – the MRA estimates there to be 400 000 such traders, who

support as many as 1.8-million dependants. He says they are also inappropriate in the context of a

yearly ferrous scrap surplus, which the MRA estimates at between 1-million and 1.5-million – the

domestic industry collects about 3.5-million tons a year, of which the consuming industry only trades

in 1.5-million tons. The “onerous” requirement of insisting on all scrap being exported through Port

Elizabeth would also add about R700/t to transport costs, which would be passed on to the generators

of scrap in the form of lower prices. The Road Freight Association (RFA) also objects to the designation

of Port Elizabeth as the sole port of export, arguing that it could negatively affect the viability of

hauliers. Road freight operators, the RFA argues, are typically able to rely on a return leg from Durban

when transporting scrap from the interior of the country. However, there is now a serious risk of the

return trip from Port Elizabeth becoming a “dead leg”, which could result in some hauliers closing

down. However, Itac spokesperson Foster Mohale argues that a designated port has many benefits

and will contribute towards the objectives of improving the administration of the system. The

proposed tightening of the PPS system – introduced primarily to improve domestic scrap availability

and facilitate a 20% to 30% discount to export prices for local consumers – is broadly supported by

scrap consuming industries, frustrated by the fact that the PPS is currently being bypassed by the scrap

sector. IN SUPPORT OF TIGHTENING Non-Ferrous Metal Industries Association of South Africa

chairperson Bob Stone tells Engineering News Online that the majority of its members are supportive

of a further tightening of the PPS guidelines, as there are currently too many loopholes. Government

introduced the discounts and a restriction that scrap could not be exported before first being offered

to domestic consumers in favour of introducing an export duty, or banning scrap exportation entirely;

a measure that has been introduced in a number of other countries to shore up domestic supply. But

Stone says he has yet to come across a member firm that has successfully negotiated the discounts

initially anticipated when the system was introduced. Scaw Metals CEO Markus Hannemann adds that

the proposed amendments should also be viewed in the context of the overall objectives of the PPS,

which is to ensure the “steady supply of quality scrap material to local users at a price that is

reasonable in order to support local industry”. Hannemann argues that that objective is currently not

being met and that the Itac intervention is designed to try walk a middle road between an outright

ban and continuing to sustain an export channel that is aligned to the beneficiation goal. Scaw,

therefore, supports the proposed changes and also believes that the steel and engineering sector will

benefit from the new policy, by securing current jobs and levelling a playing field currently made

uneven by the large scale export of quality scrap. Starkey acknowledges that the PPS is not working as

envisaged, but also questions whether it is the best instrument for meeting government’s aims.

CONSULTATION NEEDED? “Our appeal to government is to have a proper roundtable consultation

with all industry stakeholders on the proposed amendments and the PPS system in its entirety,” he

says, stressing that the MRA is keen to be part of a “constructive” solution. “We need a platform

through which to engage government and other industries to find a solution to the problem.” Steel

and Engineering Industries Federation of Southern Africa (Seifsa) chief economist Henk Langenhoven

says further dialogue is probably necessary, as the proposals outlined in the Gazette do appear

onerous. He also cautions that there are often negative outcomes even when new regulations are well

intentioned. He says Seifsa remains concerned about the availability and pricing of scrap, which is

affecting the competitiveness of domestic industry. “This is an attempt to plug the holes and stop the

circumvention of the initial guidelines,” Langenhoven explains. “My worry, as an economist, is that

the new rules are so onerous that it might stop international trade completely.” Others are dubious

about whether further dialogue will yield a solution, particularly in the context of a material trust

deficit that has developed, largely as a result of what is perceived to be the scrap industry’s ongoing

circumvention of the PPS. “Discussions on this issue have been ongoing since around 1998. The

conclusion in most of those meetings is that industry needs assistance –we are becoming

uncompetitive, we are closing, we are losing jobs,” Stone says. “So we can go on talking for another

10 or 15 years, but by then the industry, which is already only half of what it was, will be no longer . .

. and we will become totally deindustrialised.” Itac’s Mohale confirms that the reason for the proposed

amendments is to improve compliance and enforcement. “Improved, effective administration will

support the objectives of the PPS to provide the necessary input material which will ensure

internationally competitive beneficiation of scrap metals by the local consuming industry,” he says.

Mohale says the notice forms part of the consultation process and stresses that all comments will be

“duly considered”. “Should a need for further information arise, relevant parties will be approached.

The recommendations will be submitted to the Itac for consideration after which the amendments

will be published