Seeking new passages

Throughout the previous and the current decade, export markets in China have prompted recyclers of metals, paper and plastic to become familiar with the logistical procedures required to ship their materials to that nation.

In 2015, China continues to buy considerable volumes of scrap materials from North America (and other parts of the world), but statistical evidence is beginning to mount that China’s appetite for most types of imported scrap has peaked.

For recyclers positioned to export, the prospect of serving markets in India and the ASEAN (Association of South-East Asian Nations) region holds some promise, though determining how to overcome shipping obstacles is among the foremost challenges.
 

New frontiers

China has never been the leading overseas destination for ferrous scrap generated in the U.S., but reductions in purchases by mills in China and other East Asian countries have recyclers in North America exploring other options.

At the Ferrous Division meeting at the 2015 Bureau of International Recycling (BIR) World Recycling Convention in Dubai, United Arab Emirates (UAE), in May, Ferrous Division President William Schmiedel commented, “We see potential growth in ferrous scrap demand in GCC (Gulf Cooperation Council) countries as well as Egypt and India.”

Referring in part to the GCC nations (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE), Schmiedel, a trader with New York-based Sims Metal Management, said scrap demand “is mostly due to construction projects along with oil and gas [sector demand] and other infrastructure development.”

George Adams of SA Recycling, Anaheim, California, said in 2015 China has been doing “little, if any” buying of U.S. ferrous scrap.

He said the South Korean market “has also been quiet recently due to increased exports from Japan and a recognizable movement away from container imports of ferrous material.” Adams referred to Taiwan as “a steady buyer of ferrous scrap, albeit at ever-decreasing prices.”

A potential growth market for Adams and other U.S. Pacific Coast exporters is the ASEAN region, which includes mills and foundries in Indonesia, Malaysia, Thailand and Vietnam.

“This market has been active recently, procuring several cargoes,” Adams said. “Their market re-entry has partially been aided by lower [steel] exports from China,” he added, referring to the region as “a bright spot” for western U.S. exporters.

Zain Nathani of India’s Nathani Group of Cos. said Indian steel mills, foundries and induction furnace operators imported 4.4 million metric tons of ferrous scrap in the 10-month period from April 2014 through January 2015.

India buys containerized and bulk shipments of ferrous scrap from the U.S., Australia and the United Kingdom, Nathani said, adding that in 2015 “a lot of Japanese [ferrous scrap] exporters are beginning to focus on India.”

Hisatoshi Kojo of Japan’s Metz Corp. confirmed that Japanese exporters, like their counterparts in the United States, are seeking out new destinations for their scrap. “Crude steel production is stalling in Taiwan and South Korea, such that scrap purchasing momentum in these major importing countries is not like it was,” he said.

As did Adams, Kojo said the ASEAN region was of growing importance. “Steel mills in Southeast Asia boosted their purchasing activity as soon as they saw the Japanese scrap market price reach the bottom in mid-March 2015,” he stated.

What has happened in the ferrous scrap market also is happening with aluminum and copper scrap, recovered fiber and plastic scrap.
 

Potholes and waves

Getting scrap materials to many of these emerging markets can be the tricky part, as was discussed during a session at the 2015 Paper Recycling Conference India, which the Recycling Today Media Group hosted in New Delhi in late January.

Exporters to India are commissioned to “try to work through a lot of the challenges of shipping to India [and] none of them are easy,” said Michael Belus of GP Harmon Recycling, Jericho, New York.

Belus and his fellow panelists described several of the considerations that importers and exporters of recovered fiber face when they conduct business in India.

Session moderator Atul Kaul of Saudi Arabia-based WARAQ Arab Paper Manufacturing Co. Ltd. commented that some 40 million tons of recovered fiber were traded across a national boundary in 2014 and that logistics and shipping are critical factors in all such transactions.

Belus, who as senior director of international business at GP Harmon helps oversee the company’s business in India, said GP Harmon’s challenge begins with the fact that the company trades with “224 active [mill] customers in India, which gives you a sense of how fragmented the market is.”

Locations near ports and rail sidings “area a strategic advantage” for mills, Belus said, as this helps them avoid India’s “high inland transportation costs.”

In addition to being costly, inland transportation in India can add considerable time to an already long journey for a shipment of scrap paper. Belus said some container vessels may take from 30 to 60 days to go from the U.S. to the receiver’s designated port in India, depending on the number of stops on the way. Then, after arriving in India, it may take another eight to 17 days for a container to travel from the port to its inland mill destination.

Recovered fiber bound for consumers in India leaves the U.S. predominantly from the Atlantic Coast, Belus said, adding that the most active ports are New York City/northern New Jersey; Savannah, Georgia; Norfolk, Virginia; Baltimore; and Charleston, South Carolina.

Panelist Ranjit Baxi of J&H Sales International, London, said because of scrap paper’s relatively low value, freight and delivery charges represent some 40 percent of the cost of a transaction. This compares with an industry average of 12 percent.

The better news for recovered fiber traders, Baxi said, is that “freight is no longer a black box. It maybe was 30 years ago, but now it’s transparent.”

Also providing good news is that despite recovered fiber’s low value, “Shipping lines like scrap paper as a backhaul,” Baxi said. “It helps them reposition their boxes” as a “guaranteed cargo” for containers returning to Asia after having brought finished products from Asia to Europe or North America.

That hasn’t made holding down shipping costs easier, Baxi added, with the multiple considerations in play, including the rates of the shipping alliances, currency fluctuations and global economic factors, such as volatile oil prices.

Among India’s challenges will be upgrading its ports to handle ever-larger container ships, Baxi said. The nation also will need to upgrade its road and rail networks to handle a growing amount of global trade as it strives to become the world’s third largest economy by 2020, he added.
 

Passing inspection

Overcoming logistical challenges may be in the best interest of nonferrous recyclers and traders, with the secondary aluminum industry in India growing rapidly.

Mohan Agarwal of secondary aluminum producer Century Metal Recycling, Palwal, India, foresees Indian demand for aluminum scrap continuing, in part thanks to the seven facilities operated by his company.

Century’s seven smelting facilities produce up to 225,000 metric tons per year of secondary aluminum alloys. Two of the plants are joint ventures with Japanese firms (one with Nikkei, the other with Toyotsu).

Demand for aluminum alloys will grow along with India’s automotive sector, Agarwal said. India is currently the second largest two-wheel motorized vehicle producer in the world and the seventh-largest automaker globally. India “is expected to become the world’s third-largest auto producer by 2020, with 7 million units annually.”

Since 2014 India has been exporting more small cars than Japan, Agarwal said, and it also will continue producing such vehicles for its growing middle class.

“More and more car manufacturers are looking at India,” Agarwal said, adding that these manufacturers are locating assembly plants and research and development facilities in the nation.

To grow along with the auto industry, “aluminum alloy production [in India] must grow threefold, from 500,000 metric tons to 1.5 million metric tons” of annual production, he said.

However, recycling companies that ship scrap metal to India are now dealing with a new container inspection regimen that was announced while the industry was gathered at the BIR Convention in Dubai.

India’s Directorate General of Foreign Trade (DGFT) distributed a 10-page document with revisions to its imported scrap metal inspection regimen Monday, May 18, the day before the BIR’s International Trade Council met in session.

At the BIR session, three officers of the Metal Recycling Association of India (MRAI)—Ikbal Nathani, Sanjay Mehta and Dhawal Shah—provided their perspectives on the revisions. According to the trio, among the biggest changes is that the DGFT has dropped its requirement that shippers email a video clip of the loading process, allowing emailed photos to be used as an alternative.

The DGFT also required all current preshipment inspection agencies (PSIAs) to reapply for registration, having distributed the new application form.

Nathani said the DGFT found the reapplication process necessary after discovering that one-third of current PSIAs may be “bogus” and not attached to any current mailing address or office.

Those applying for PSIA status had to do so by June 8, 2015, to meet the July 1, 2015, deadline for the new procedures.

Nathani said some 10 Indian government ministries and agencies were involved in creating the new system, with the foremost concerns tied to preventing radioactive scrap and live munitions from entering the country.

The 10-page DGFT document, titled “Public Notice No. 12/2015-20,” can be found on the DGFT website at http://dgft.gov.in/exim/2000/PN/PN15/pn1215.pdf.

Nathani warned recyclers present that they had only about 20 days to take the steps necessary to keep their current PSIA arrangements by the July 1 deadline.

He also said that the DGFT PSIA process is intended to apply to operators of physical scrap yards, not traders. In addition, Nathani noted that the current PSIA application form includes a section where recyclers can note their membership in the BIR, the MRAI and the Institute of Scrap Recycling Industries.

Between the new customs rules and the challenges of inland transportation, recyclers shipping to India will need to do their homework to ensure materials reach their destination in a timely fashion.

The author is editor of Recycling Today and can be contacted at btaylor@gie.net.