The key to rescuing South Africa’s ailing steel industry, in which a unit of ArcelorMittal South Africa (AMSA) is feuding with smaller competitors, is by growing demand rather than fixating on export controls, the country’s chief trade regulator said.

AMSA last year shut a steel mill, citing competition from so-called mini-mills that use scrap metal as their feedstock rather than iron ore. The company, which still runs Africa’s biggest steelmaking plant south of Johannesburg, has demanded the government end a 20% tax on the export of scrap, which it says reduces the cost of the material for its rivals.

“There’s a bubbling belligerence that says I can only survive by you kind of killing that instrument,” Ayabonga Cawe, chief commissioner of South Africa’s International Trade Administration Commission (Itac), said in an interview on Thursday at Bloomberg’s office in Johannesburg. Instead, the issue that needs to be addressed is “how do you fix on the demand side,” he said.

South Africa’s annual steel production collapsed to about 4.5-million tons last year from 9.7-million tons in 2006, with domestic producers struggling to compete with cheaper Chinese imports, while contending with surging power and logistics costs, and a stagnant economy.

We need “a rapid and aggressive infrastructure program,” Cawe said. Itac is responsible for customs tariff investigations and recommending trade remedies including import and export controls.

While Arcelor uses coking coal to fire blast furnaces that convert iron-ore into steel, rivals including Scaw Metals Group and Cape Gate Holdings use electric arc furnaces to melt scrap. In addition to the export tax, the electric-furnace operators benefit from controls on the price of scrap, which are set at a discount to the international price. The discounts were implemented in 2013 and the tax in 2020.

As steel scrap is a recycled material, it’s more environmentally friendly than iron ore and is therefore a strategic material, Cawe said. Prior to the imposition of export controls in 2013, South Africa shipped more than a million tons of scrap to India annually, he said.

“If we can all agree that in principle that scrap in strategic material that has to be regulated, then we can have a debate about how you recalibrate the different rents,” he said. “We must find a balance, but that balance I am afraid is framed in very antagonistic terms.”