EU adds to scrap hurdles

Governments around the world largely agree that lowering greenhouse gas (GHG) emissions is a global imperative. This has resulted in commitments and investments to reduce dependence on fossil fuels and to seek energy-efficient ways of doing business.

Producers of recycled-content metals are happy to point out that a circular economy—converting discarded materials and end-of-life goods back into new basic materials—offers proven methods to reduce GHG emissions while maintaining economic competitiveness.

Unfortunately for companies that collect, process and trade these scrap commodities, a protectionist mindset regarding the materials also seems to have taken hold, threatening to cause more harm than good to the circular economy.

The European Union has joined the parade of restrictions being introduced to the global trade of scrap metals via a policy the European Commission (EC) has adopted that offers the latest disruption to companies in the global metals chain.

Ingress and egress

Global trade in recyclables receives high-profile attention (and scrutiny) when potentially hazardous materials cross borders and subsequently are handled unsafely. The shipment of cathode ray tube (CRT) monitors from Organization of Economic Cooperation and Development (OECD) member nations to less developed (and more lightly regulated) nations offers a high-profile example.

Recently, attention also has been cast on shipments of mixed postconsumer plastic loads from OECD to non-OECD nations, with concerns about the safe sorting of this material and the ultimate disposition of residual, nonrecyclable materials in the shipments.

Import bans and restrictions introduced by the People’s Republic of China reportedly are tied to the rise of Chairman Xi Jinping to that post in 2013. Xi reportedly viewed a documentary spotlighting a shoddy imported plastics sorting facility and subsequently moved against all imported circular commodities as “foreign garbage.”

China—a scrap deficit nation for most metals, paper and plastics—has not done any favors for its basic materials industry with its circular commodities import bans and restrictions.

But because of its influence in the region, it has managed to convince other nations in Asia that subjecting scrap metal to tight restrictions and inspection regimens is the best way forward.

Labeling scrap materials with 3 percent contamination as unwelcome is a questionable tactic, especially in the metals sector. Producing steel, aluminum or copper from virgin materials involves energy-intensive and GHG-emissions-heavy processes to extract metal from mined ore that consists of 40 percent to 60 percent residual materials using iron ore as an example and 75 percent to 85 percent residuals in the case of bauxite.

How the environment—and especially the GHG-affected atmosphere—benefits from scrap import bans is exceedingly unclear. (Producers of ore-based metals might have an answer involving protecting their business models, however.)

Global sellers and buyers of scrap commodities have shifted investments and capacity in response to scrap trading bans as they arise in importing nations. In early 2021, concern about disruption in an exporting region also started to emerge, setting the table for a curious new circumstance in 2022.

Bad news that could have been worse?

In mid-November 2021, the EC issued a document pertaining to the outbound shipment of scrap materials, including commonly traded ferrous and nonferrous grades. Some traders feared the EC would recommend a ban on scrap moving from Europe to countries with developing economies, but the policy did not go that far.

Changes and additional paperwork could yet be in the offing, however. An executive summary of the new document indicates traded materials (still designated as “waste” by the EC) “can only be exported to non-OECD countries that demonstrate their ability to treat” the materials. The EC also asks regulators to “ensure that exporting companies and countries verify that facilities properly treat this waste [sic].”

Non-OECD countries are those outside of the 37-nation Organization of Economic Cooperation and Development. The group consists of countries with the highest per capita gross national product and income, with its members clustered in Europe, North America and the Pacific Rim of Asia.

The 120-page document with the complete proposed regulation contains in its second paragraph the contrary notions that the traded scrap commodities generate “risks for human health and the environment” while also carrying considerable value.

After mentioning the risks, the regulation’s authors write that the shipped materials “often have a positive economic value, notably as secondary raw materials that can replace and reduce dependence on primary materials and thereby contribute to a more circular economy.”

The EC says consultations with stakeholders have led it to favor the policy with the opt-in system for non-OECD countries as a way to “support the EU’s objective to stop exporting its waste challenges to third countries and contribute to better addressing illegal shipments of waste without risking excessive costs or disruption.” (Third countries is the EC term for non-EU-member countries.)

However, the document calls for “harmonized” contamination thresholds of the type introduced by the People’s Republic of China and (soon) Malaysia. Specifications used in Europe typically leave room for flexibility. Specifications authored by the Washington-based Institute of Scrap Recycling Industries (ISRI) frequently contain phrasing such as “agreed upon by buyer and seller.”

In terms of the recordkeeping tasks confronting scrap processors and traders under the new regulation, the document says the EC expects to:

• examine and establish harmonized contamination threshold levels to classify certain wastes as green-listed or not;
• examine and establish criteria to distinguish between used goods and waste for certain objects or substances;
• establish and maintain a new framework for the export of green-listed waste from the EU to a non-OECD country, especially the establishment and updating of a list of countries to which the export of such waste is authorized;
• establish a harmonized calculation method for financial guarantees or equivalent insurance;
• monitor the export of waste to OECD countries and mitigate environmental problems that such exports might cause; and
• organize and facilitate the work of a group at EU level with the task to facilitate and improve cooperation on enforcement of the WSR (waste enforcement group).

How the policy will affect trading patterns was starting to develop in late November 2021. Reactions to the policy have shown a steady parade of concern by recycling companies and the trade associations representing them.

Reactions and concerns

After reviewing the document, ISRI said it was “relieved that the proposed regulation will not be imposing trade restrictions on recycled commodities between the United States and Europe.”

However, ISRI expressed concern about looming documentation demands for traders, unclear guidelines about what is a commodity versus “waste” and the overall scrutiny secondary commodities receive compared with mined materials.

“The regulation fails to provide adequate, clear and concise definitions and distinctions between valueless discarded waste and specification-grade recyclable commodities that are in high demand by global manufacturers with global supply chains,” ISRI says. “Imposing burdensome procedures on exporters to judge another country’s policies and recycling infrastructure or worse, banning trade of recyclable commodities—especially when no such comparable regulations are being imposed on carbon-intensive, primary raw materials extracted from the earth—will lead only to greater stress on the environment from mining and manufacturers being challenged to meet sustainability goals,” it states.

By late November of last year, the impacts of the policy were emerging. Trade media reports indicate China’s government did not respond to a survey designed to provide the “opt in” to allow EU processors and traders to send scrap to Chinese ports.

Several traders Recycling Today contacted say European exporters who took the proper procedural steps are still able to export to China, but buyers in that nation are expressing reluctance to source from the EU.

A potential failing of the new EU procedure is the EC’s use of the word “waste” to describe circular commodities, including those with value as industrial feedstock.

The situation was predicted as early as January 2021 by panelists who participate in the Brussels-based Bureau of International Recycling “The Challenge” series, who convene periodically to discuss global scrap trade issues.

At the January session, veteran trader Michael Lion referred to the then-unfinalized (but proposed) EU rules and said he saw “the possibility of some form of export controls.”

Joining in that concern was fellow panelist Murat Bayram, who works from Hamburg, Germany, for United Kingdom- based EMR Ltd. Bayram deemed it to be “a very, very dangerous situation.”

Reached by Recycling Today in late November 2021, Bayram says advanced knowledge of the situation has been helpful to companies such as EMR, which previously applied for an End of Waste (EoW) license, “knowing that China did announce they will not allow any waste shipments coming into China. So, we, for example, can still export.”

But the situation is far from clear, he adds. “A lot of [processors in Europe] try to avoid exports even having the EoW license, as the domestic market is competitive and one can avoid additional costs if containers are not accepted at the other side of the world, whereas loading a truck here and bringing it few kilometers to the mill is easy and fast,” Bayram comments.

Another nonferrous trader, who is based in Asia but sources material from Europe, says his recent experiences are similar. Some buyers in China have ascertained that facilities with ISO or EOQ (European Organization for Quality) certification can still ship from Europe to China, he says. Others are requesting scrap sent from U.K. ports.

David Dodds, CEO of Ipswich, U.K.-based Sackers Recycling, says it is uncertain how much that country’s new status outside of the EU is making a difference. “We already have EoW on all our grades of scrap for the last two years,” he says of his company.

Brexit notwithstanding, Dodds predicts, “U.K. exporters will face the same problem soon, I am sure, [and] there will be a mad scramble for EOQ criteria.”

A trader with a U.S.-based metals company says inquiries and orders from China have not reduced and might have even picked up slightly in November of last year. While U.S.-based shippers face the same inbound quality restrictions (and in some cases tariffs) for scrap they sends to China, they could benefit by not having a national framework that scrutinizes export standards.

The author is senior editor with the Recycling Today Media Group and can be reached at btaylor@gie.net.