Scrap Exports Set for Second Round of Crushing On New China Rules

May 30, 2019

The Chinese government is set to impose further restrictions on imports of high grade aluminum, copper and steel scrap, the South China Morning Post reports, once it allocates import licenses. That follows the imposition of regulations regarding lower quality scrap in mid-2018 that have fundamentally restructured global supply chains for waste materials.

They’ve also had a knock-on effect to other countries, including Malaysia and India as outlined in Panjiva’s research of May 29, leading to a cascade of tighter regulations.

China was historically a $13.2 billion import market for scrap metals, Panjiva data for 2017 shows, before the new rules were introduced. The largest supplying nation was the U.S. with 17.3%, led by copper which accounted for 60.8% of its shipments and aluminum with 36.4%. Other major suppliers shipped via Hong Kong (14.8% of the total, three quarters of which was copper) and Japan (12.8%, mostly iron and steel).


WIDESPREAD IMPACT FROM CHINA IMPORT LIMITATIONS


Chart segments Chinese imports of scrap metal by origin and product (HS-4) for the 12 months to Dec. 2017, denominated in dollars. Source: Panjiva

It’s unlikely that U.S. exporters will receive new licenses given the ongoing trade war between the two countries. The existing rules have already seen U.S. exports to China drop 72.4% year over year in 1Q. That still equates to $940 million on an annualized basis using the past six months shipments.

There’s also the risk for U.S. exporters that substitute markets may change their rules too. The most important are South Korea, shipments to which surged 70.4% higher year over year in 1Q, and Taiwan which saw an 18.3% improvement.

CORRODED CHINA SHIPMENTS NOT OFFSET BY KOREA, TAIWAN PICKUP



Chart segments U.S. exports of scrap metals by destination on a monthly and three-month average basis. Source: Panjiva

U.S. exporters have generally already diversified their shipments, though the sector is highly fragmented and so may have limited economies of scale. The leading exporter aside from logistics firms since 2017 has been Sims Metal Management with 403.6k tons shipped, or 4.0% of the total.

Sims has mostly shipped to Taiwan and Vietnam as well as China. Among other Greta’s Global Metcorp shipped 301.8k tons including Indonesia, while Advanced Steel Recovery (ASR) shipped 210.4k tons mostly to Taiwan.

SIMS SIMPLY GROWING QUICKER THAN COMPETITORS


Chart segments U.S. seaborne exports of scrap metals by shipper on a monthly and three-month average basis. Source: Panjiva

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