Barriers and roadblocks

Recyclers in any given locality can point to instances when action (or inaction) by their own government has introduced hassles for their businesses.

In 2018, recyclers around the world could all point to actions taken by the government of the People’s Republic of China as having brought disruptions and price swings to markets via hastily enacted policies.

Running in second place on the disruption list were trade policies enacted by President Donald Trump.

Between the actions of the two governments, 2018 may be remembered in part by recyclers as a year when politicians brought changes in scrap flows and pricing tied to the political realm rather than to the pure supply-and-demand market forces.

The letter of the law

Political matters nudged into market conditions in every major recycling sector in 2018, with China’s moves roiling the nonferrous and nonmetallic scrap sectors, while the Trump administration issued executive orders that caused abrupt changes to the steelmaking (and ferrous scrap) sector.

Continuing to follow up on 2017’s “National Sword” policy designed to either upgrade the quality or curtail the purchasing of scrap materials, the government of China introduced and enforced increasing restrictions on imported scrap materials.

Among those affected have been scrap recyclers accustomed to exporting steady amounts and particular grades of copper-bearing scrap.

Figures collected by the United States Census Bureau indicate the U.S. scrap sector shipped 37.3 percent less red metal scrap by volume to the People’s Republic of China in the first half of 2018 compared with the first half of 2017.

The biggest drop in percent terms came in the alloyed scrap category, which can include scrap brass fittings and valves, radiators and other obsolete scrap items.

Although recyclers looked for alternative homes for these materials, the Census Bureau figures indicate such homes were not overseas. The volume of copper-alloyed scrap exported from the U.S. to anywhere in the world dropped by nearly 31 percent in the first half of 2018 compared with 2017.

The price of copper stayed in a relatively narrow trading range of $6,500 to $7,000 per metric ton in the first half of the year as measured by the London Metal Exchange (LME). In July and August, the LME price dropped, and copper has subsequently drifted closer to the $6,100 per metric ton range.

The aluminum market saw trade-related disruptions as well, with mixed shredded aluminum scrap facing tougher entry into China, and Trump administration tariffs supporting the restart of capacity at at least one primary aluminum smelter in the United States.

Trump administration attempts to protect the steel industry have gained the most attention, and, judging by the earnings reports of steelmakers, they have made that sector’s business more profitable.

In the ferrous scrap market, mills have purchased shredded scrap in the $330-to-$385 range throughout the year, with severe month-to-month volatility mostly having been kept at bay. (For more on the recent ferrous scrap market, see “Profits but problems” beginning on page 36.)

Difficulty connecting

Recyclers in the U.S. did not have to go far from home to experience transportation-related woes in 2018.

Throughout the year when talking to Recycling Today staff members, recyclers pointed to constrained trucking availability, rail shipping issues and congested ports as aspects of their businesses that have become an outsized source of difficulty.

The Washington-based Institute of Scrap Recycling Industries (ISRI), having heard from its members about the woes, made the topic the focus of a keynote sessions at its 2018 convention in Las Vegas.

At that session, a representative from a trucking association and another from a freight rail company acknowledged the overburdened condition of their sectors, pointing to a lack of qualified personnel as an ongoing issue. (Panelist Bill Sullivan of the American Trucking Associations later wrote an article for Recycling Today further exploring the issue. It is available at www.RecyclingToday.com/article/jump-starting-the-trucking-industry.)

Exporters faced additional transportation-related difficulties in 2018. Regulations or tariffs—whether issued by China, other nations in Asia or the U.S.—have caused exporters to have to divert containers while they were on the water or be encumbered with storage (demurrage) charges. Inspections carried out by port officials, particularly in China, created another export container management issue.

This issue affected recyclers of metal, paper and plastic. After nearly two decades of steady flows of scrap materials to China from other nations, the end of this era seemed to sail into view in 2018.

The fun may have only started

At the 2018 Paper & Plastics Recycling Conference, organized by Recycling Today and held in Chicago in October, panelists discussed the future of the old corrugated containers (OCC) grade in an era when China is trying to wean itself from scrap imports. At the event, Hannah Zhao, a senior economist with Boston-based RISI, said collected OCC in China had risen sharply in price and the demand and supply balance had tightened. She said recycled pulp imports to China grew by 1,817 percent in the first several months of 2018, but the 230,000 metric ton figure means Chinese papermakers likely will invest to add more such capacity outside of China.

At November’s 2018 Paper & Plastics Recycling Conference Europe in Prague, the freight tie-in to the global disruption in paper and plastic scrap trading was brought into view. Panelist Ved Prakash of Belgium-based scrap trading firm Gemini Corp. said plastics recyclers continue to face backlash from rerouted containers created by China’s restrictions on baled plastic scrap in 2017.

Later in November, ISRI said China’s national customs agency had released a list of China Certification and Inspection Group (CCIC) offices expected to offer preinspection services in 2019. ISRI describes this as a shorter list with “noticeably absent” cities and countries dropped from the roster, including Mexico, Brazil, Argentina, India, Sri Lanka, Myanmar, Cambodia, Russia, Mongolia and former branch offices in Spain and Hungary.

At the Paper & Plastics Recycling Conference Europe, a panel of veteran European recyclers offered their perspective on the turbulence of the industry. Panelist Cees van Berkel of Netherlands-based CVB Ecologistics BV said managing a recycling firm involves “making the margins” available between procurement and resale of scrap materials. In boom times and downturns, he said, “You learn to cope; sometimes it’s easier, sometimes it’s difficult.”

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