State of scrap trade

With China placing tariffs on scrap commodities from the U.S., already difficult scrap market conditions have become more challenging. The import restrictions China enacted earlier this year have led to some uncertainty as to where U.S. nonferrous, mixed paper and plastic scrap commodities can go.

As of Aug. 23, China began to impose tariffs of 25 percent on certain U.S. goods, including scrap. On that same date, the U.S. Trade Representative also initiated a 25 percent tariff on certain Chinese goods. According to the Institute of Scrap Recycling Industries (ISRI), Washington, the 25 percent tariff applies to paper, plastic and several types of metal scrap, including ferrous, copper, aluminum and nickel-bearing scrap.

Additionally, concerns have arisen regarding proposals for plastic scrap commodities that went before the Basel Convention in Geneva Sept. 3-6. The convention wrapped up with support for Norway’s proposal to add plastics to the list of wastes subject to the trade controls under the convention as well as for a European Commission proposal that would redefine certain recycling processes as “treatment” rather than recycling. ISRI had voiced concern on these proposals prior to the convention, saying they could harm the global trade of plastic scrap.

Recycling Today connected with ISRI President Robin Wiener to get her perspective on some of the changes affecting the international trade of scrap.

Recycling Today (RT): What is the state of scrap trade today compared with one year ago?

Wiener: Scrap market conditions today vary widely by commodity. For those commodities that have traditionally relied on Chinese demand, including mixed paper, postconsumer plastics, shredded nonferrous scrap and others, market conditions have clearly become more challenging this year. For other commodities that are primarily driven by domestic demand, such as iron and steel scrap, market conditions are actually better this year.

RT: How do you think scrap trade will fare in 2019?

Wiener: Scrap is a globally traded commodity. Scrap demand goes hand in hand with manufacturing output, and so economies with expected economic and manufacturing growth are also expected to see upticks in scrap demand. In addition, scrap consumers around the world appreciate the high quality and consistent delivery of U.S. scrap.

Access to foreign markets has always been a cornerstone of the health of the recycling industry, and that will certainly continue in 2019, especially with strong demand in Europe, Asia (outside of China), Canada and Mexico.

Canada and Mexico are already two of our most important trading partners and, therefore, we’re closely monitoring the NAFTA (North American Free Trade Agreement) renegotiations. The renegotiations will modernize many provisions that help facilitate the movement of goods and services across North America, and we expect those benefits—such as improved customs procedures—to also benefit the recycling industries of all three countries.

Additionally, recycling is the first link in a global supply chain and, as the agreement strengthens existing and helps create new supply chains, recyclers will also benefit. That all being said, there are still quite a few unanswered questions.

RT: How are Section 232 tariffs affecting scrap recycling and the economy?

Wiener: For the economy as a whole, most economists expect the tariffs will have minimal impact on overall U.S. economic growth. However, domestic consumers of steel and aluminum are extremely concerned about the availability and costs of their raw material inputs due to the trade situation. For many in the industry, the expectation was that the tariffs would restrict imports of steel and aluminum, driving up the price of those metals and, by extension, for scrap metal. But scrap metal prices have not kept pace with the increases in domestic steel prices so far this year.

In addition, retaliatory trade measures from our major trading partners have been and continue to be a major concern for scrap traders.

RT: How are Section 301 tariffs impacting scrap recycling and the economy?

Wiener: The [Trump] administration’s first list of products to be levied tariffs included parts used in shredder operations. These parts need to be replaced often, sometimes daily, and are one of the top financial outlays by these operators. Now these parts cost 25 percent more and [have] an impact on the bottom line of these operators.

Additionally, China retaliated against the administration’s policy by imposing tariffs on all scrap commodities. While trade to China was already impacted due to China’s import restrictions, these tariffs have the potential effect of nearly cutting off trade entirely as Chinese consumers look to cost-competitive suppliers in other regions.

RT: What are some of ISRI’s biggest concerns about the plastics-related proposals before the Basel Convention?

Wiener: Although we applaud a revised proposal to create a dialogue mechanism for governments, civil society and the private sector to discuss issues pertaining to reducing and better managing plastic waste, we remain concerned that any recategorization of plastics within the Basel Convention’s annexes could make the trade of plastics scrap nearly impossible, especially for countries that lack recycling infrastructure.

RT: What’s the status on nonferrous scrap trading, particularly for low-grade material? What are alternative homes for these materials?

Wiener: China has been the major source of overseas demand for U.S. nonferrous scrap. As a result, China’s import restrictions are having outsized impacts on a range of nonferrous scrap commodities. For example, U.S. exports of copper and copper alloy scrap to mainland China during January to July 2018 were down 41 percent as compared to the first seven months of 2017. The corresponding figure for aluminum scrap is a 26 percent decrease.

Finding homes for this material has been a challenge, although growth markets do exist, including India, Mexico and Southeast Asia. The focus going forward will continue to be on improving quality, which will benefit scrap processors and consumers both in the U.S. and overseas.

RT: With various tariffs and restrictions, has ISRI membership gone up or down in the past year? How is membership being affected by some of these changes?

Wiener: ISRI membership has increased over the last year. ISRI has experienced a 5 percent growth rate this year and looks forward to a continued strengthening in 2019. Much of this can be attributed to the fact that we are recognized as an effective advocate for the recycling industry on these very issues. Furthermore, ISRI is a trusted source of information and analysis that those in the industry cannot find any place else.

Robin Wiener is president of the Institute of Scrap Recycling Industries (ISRI), Washington. She can be contacted at rwiener@isri.org.