Looking for direction

The trade of scrap metals to and from many eastern countries that are part of the European Union (EU) continues to be complicated for a variety of reasons. Besides the fact that the region continues to emerge from a prolonged recession, transport issues also concern traders.

Some Eastern European nations, having joined the EU in more recent years, are concerned about the import of scrap, lumped in as “waste,” to prevent dumping.

Overly strict adherence to the EU’s policy on transboundary shipments of waste also has been cited as a major concern.

Meanwhile, non-EU countries, such as Russia, the Ukraine and Belarus, have imposed restrictive export duties or taxes on various scrap metals for years.

Escalating geopolitical tensions in Ukraine have only added to the struggles, interfering with shipping routes.
 

Trade restrictions

Robert Voss, chairman of the Bureau of International Recycling’s (BIR’s) International Trade Council and CEO of the U.K.-based trading firm Voss International, says, while an abundance of scrap metals are being traded among EU countries, difficulties also are creating concern.

Countries such as Slovakia, Hungary and Romania, now part of the European Union, should be contributing to the free flow of materials intended to exist in the EU. However, Voss says that’s not always the case, as there are varied interpretations of the EU trade legislation governing the shipment of “waste” materials.

“A lot of what is happening now is that some of the old Eastern Bloc countries are making life as difficult as possible for exporters out of the EU,” says Voss. “For example, they may be stopping materials at ports and instigating ridiculous checks, sometimes holding containers up for months and months, without hardly any excuse.” Voss says the checks may result in finding frivolous errors in documentation that are used to inflict fines.

“Their interpretation of the legislation is, in my opinion, far too stringent,” he says. “We are all governed by the legislation written out of Brussels, but it’s open to the interpretation of the sovereign states, and some of them are being far too punitive.”

He refers to the EU regulation regarding the transfrontier shipment of waste, which includes scrap metals. Because some countries interpret the law too strictly, he says, moving goods across or through borders can be tricky. If the load gets stopped and an error or problem is found, it can take months for the containers to be returned, and exporters can be hit with hefty fines, Voss says.

“When you’re crossing borders, you take the chance that one country involved may restrict the export of the materials. Therefore, it’s no longer a free-trade zone, and it becomes a risk,” he explains.

While Voss says the problem seems to be isolated presently, exporters have become increasingly concerned, particularly when shipping longer distances.

One recycling industry executive who is concerned about transboundary shipments of scrap is Jeffrey Kimball, commercial director of Loacker Recycling Group’s Hungary office in Budapest. Kimball refers to the EU Shipment Regulation’s Annex VII requirements designed to track waste, including scrap metals, that is shipped among EU countries.

“It’s supposed to help environmental agencies track shipments of waste, but unfortunately they’re devoting a lot of resources ‘tracking’ absolutely harmless waste shipments,” he says. “We have a lot of reporting overlap in our industry.”

Kimball explains that in addition to monthly reporting by product and by country to the EU, various local authorities also request similar information. He says he believes that government agencies should coordinate these reporting requirements and, instead of tracking millions of tons per year of raw materials used by industry, concentrate their energies on issues surrounding problematic waste arisings, shipments and illegal disposals.

“As all member states collect the data differently, the efficiency of the current Annex VII accompanying document is questionable,” Kimball says. “When we have to put all source and end-user details on a document which accompanies the goods, it’s an administrative barrier and a breach of commercial secrecy. Every party to the transaction has full access to proprietary commercial information.”

Kimball says he believes Hungary’s environmental ministry has unfortunately begun to see the documentation as a source of revenue. “One ‘mistake’ on the Annex VII—unfortunately every member state has its own interpretation of proper filing—and the shipment is stopped at the border until the issue is settled and/or a fine is paid,” he says. “I have personally heard about trucks blocked for several months,” Kimball adds.

Another barrier, he says, is tighter control of metal flows prompted by metals theft. Kimball refers to the mandated daily reporting that all metal traders active in Hungary are required to provide to Hungarian customs authorities on every single transaction as an administrative burden that also can lead to delays and fines. “It’s a bit intrusive, but I hope some good is coming of it,” he says.

Finally, Kimball refers to import restrictions that continue to be in place in countries such as Romania and Bulgaria, which joined the EU more recently. The barriers were intended to prevent the import or dumping of waste to the countries’ landfills, he says, but they also unwittingly affect scrap metals.

“Every shipment of waste including scrap metal has to be registered and handled almost like hazardous waste in order to import it,” says Kimball.

These requirements continue for the time being in places such as Bulgaria and Latvia, though some requirements are scheduled to be removed at the end of 2014 (Bulgaria) and late 2015 (Romania).

At the moment, according to Kimball, “This for them is a real barrier to trade because it hinders local industry and local smelters.” Consumers in those countries working to source metals abroad have to go through dramatic administrative hurdles that can take months, he adds.
 

Slowly changing

The current political tensions in the region notwithstanding, Eastern European countries that are not part of the EU continue to pose trading challenges.

Voss says Ukraine is a bit of a no-go area at the moment, while countries such as Kazakhstan, Belarus and Azerbaijan continue to uphold export restrictions on scrap.

“There’s still a significant ban on exports, which seems to be Russian-led, and it seems to be growing,” says Voss.

Russia has had restrictive export duties on various scrap metals for several years.

Björn Grufman, president of the BIR and also CEO of Sweden’s Metallvarden AB, says, while Russia is reducing its export duties, its domestic scrap prices have been above European levels. He explains that most of Russia’s exports of ferrous scrap are traditionally shipped through the Black Sea to Turkey. But with shipping routes likely hampered by tensions in the region, these exports also may have suffered by as much as 40 percent Grufman suggests.

However, the current crisis in Ukraine hasn’t seemed to change trading patterns to the rest of Europe, traders say.

“From what we’re seeing in Eastern Europe, the Ukraine situation doesn’t affect us that much,” says Kimball. “Trade between Ukraine and neighboring countries is virtually zero,” he says. “It’s been this way for some time.”

Michael Schneider, press officer for Remondis in Germany says the company’s business efforts in the Ukraine and Russia were less than stellar even before the current political crisis.

One problem, he says, has been reliability of doing business in some regions. “You can’t really be sure if the contract you signed two years ago will still be valid today,” he says.

Remondis trades scrap metals as well as plastics and paper scrap. Schneider says in recent years the company has retreated from its business interests in Russia and the Ukraine to some degree.

He adds, “It’s a difficult business.” Schneider says the company originally had higher hopes for the strengths of these markets since it entered them in the early 1990s. “It turned out they are not in much hurry to switch from a landfill-based waste management to recycling,” he says of Russia.

In the Ukraine, the idea of extracting raw materials from waste is slightly more attractive because the region is lacking in these natural resources, Schneider adds.
 

Economic differences

Voss says Eastern European nations vary widely in terms of economic prosperity and this has been evident in the scrap business to some extent.

Poland is a key example, with its fairly strong consumer market. Both Grufman and Voss say the nation on the whole is a significant buyer of copper scrap. Kimball says the country also has been a healthy buyer of aluminum scrap in the last couple of years, though the pace has slowed in recent months.

Grufman points to Poland and the Czech Republic as two of the strongest countries in the region in economic terms, particularly in comparison with western nations such as Italy, Spain and Greece. “They have very little domestic demand, and they have problems with what they believe is a strong euro that makes it difficult to export to other countries,” he says of these western nations.

Nonferrous scrap availability throughout Eastern Europe continues to be referred to as tight or limited, similar to what has been seen throughout the rest of the world.

Voss says with most of Europe still in recovery mode, margins continue to be squeezed and traders are fighting for the same metal. Voss says, while prices are at reasonable levels, “I just think there’s not a lot of scrap being produced.”

Grufman also describes scrap availability as limited and refers to persistent processing overcapacity in many regions, including Poland and the Czech Republic. “There is overcapacity all over the place, and they are not reducing that capacity fast enough to get back to normal margins,” he says.

For his part, Kimball says Loacker’s exports from Hungary have been stable over the past several years. The Austrian-based company now has three scrap yards in Hungary and one in Slovakia, plus dozens of others in Southern Germany, Austria and Switzerland. He says Hungary is a net exporter of everything except primary grade aluminum scrap, which is typically consumed internally. Kimball says the country on the whole exports around 1 million metric tons of ferrous scrap and about 25,000 metric tons of copper scrap annually, the majority of which remains within the EU. Most of Hungary’s ferrous scrap is exported to Italy, followed by Austria, Slovenia, Slovakia and, more recently, Turkey.

In fact, Kimball says, while scrap metals flows from Hungary haven’t changed much recently, Turkey’s entrance as a buyer a few years back was a noticeable change. “Back then it was really exotic. Now,” he says, “it’s an everyday event.”

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