BIR Non-Ferrous World Mirror May 2013

Global – The following article is based on the latest Non-Ferrous Metals World Mirror produced by the BIR world recycling organisation for the benefit of its members.

Import duties on scrap such as those imposed recently by the government of India ‘serve to disrupt what should be the normal movement of our products’, warns Bob Stein, president of the BIR Non-Ferrous Metals Division. ‘Scrap metal, given its tremendous value to the ecological well-being of the world, should never be taxed, nor should its export be controlled by industry pressure on governments.’

‘Double whammy’

Previously at zero, a 2.5% duty has been placed on all Indian imports of aluminium, iron and steel melting and stainless steel scrap. Furthermore, the Indian government has re-imposed 4% SAD duty on brass scrap imports, which were previously exempt. This is seen as a ‘double-whammy’ by local experts as payment of SAD comes on top of the ‘serious’ challenge already posed by cheaper imports of brass rods under free trade agreements. The Metal Recycling Association of India and other trade associations have asked for these measures to be reversed in order to help the country’s under-pressure secondary non-ferrous industry.

On a similar theme, Russia must begin reducing export duties from 2013 onwards by between 5% and 10% per annum; at present, these duties vary between 30% and 50% depending on the type of scrap. And in South Africa, restrictions on exports of scrap metal are thought likely to be implemented ‘sooner rather than later’ and will seemingly allow local consumers the first option to buy any domestically arising scrap even though such a system has the potential to raise price risk or working capital issues for sellers. Negotiations continue between the recycling industry and the South African government but restrictions appear to be ‘inevitable’.

In other government actions, Operation Green Fence in China has caused delays in customs release procedures for scrap, leading to container congestion and slower inbound movements. Some containers have been diverted to neighbouring countries, some have been re-packaged into a single item per container and others have been rejected.

‘Opening up’

Government interventionism remains a hot topic in Brazil, along with high energy costs, a mounting labour bill, bureaucracy, inadequate infrastructure, corruption and a ‘highly complex’ tax system. However, the country ‘appears to be opening up and is today more active not only in importing scrap but also in exporting’: last year, for example, exports of aluminium scrap soared 87% while the country’s copper scrap imports jumped 63% and its exports 42%. For Japan, meanwhile, exports of scrap to South Korea ‘remain strong’ and supply is ‘still tight’.

In other markets, the sharp drop on the LME during April curtailed flows of scrap to the market in the Middle East, leading to narrowing discounts. Also in Australasia, significantly lower volumes of scrap have been entering many merchants’ yards; at the same time, there has been evidence of further consolidation within the region’s metals industry, with redundancies and yard closures ‘now a reality facing some merchants’.

UBC prices are trading at 91-92% of three-month LME in North America but collection rates ‘are not the same as last year even at those numbers’. The secondary market continues to struggle with the ingot price, and there is some downward pressure on items such as Twitch. Red metals are enjoying strong demand but volumes are hard to find, with the result that spreads are continuing to narrow.

Paramount challenge

Maintaining scrap flows remains ‘a paramount challenge’ for the majority of recycling operations in Mexico. Demand for most grades of aluminium remains subdued, but low LME values and the resultant scrap scarcity have forced some consumers to pay high LME percentages to attract material; in the case of UBC, prices up to 96% of LME high-grade aluminium have been seen.

In Europe, a recent survey of metals traders in Germany revealed that only 3% rated their business situation as better than in the spring of 2012 while 68% said the reverse was true. Around a fifth of respondents expected business conditions to improve for them in the coming months whereas 47% anticipated a stabilisation at current levels and 32% feared a further downturn. As regards domestic scrap supply, only 11% of the surveyed companies had seen an improvement of late while 58% had detected a shortage.

France has witnessed strong demand for copper scrap at good prices from several European countries as well as decent orders for brass scrap – although ‘end users are experiencing difficulty in offering attractive prices’ for the latter. It is also reported from France that Europe’s soft lead scrap consumers are in the market at healthy price levels and that the lead batteries market is very active.

In contrast, stainless steel prices are ‘still very weak’. Industrial production in Italy is as low as 40-50% of capacity, resulting in reduced scrap generation levels. Lead scrap appears to be enjoying the best demand, not only from Europe but also from India.

As for prospects in the Nordic countries, Finland is forecast to achieve economic growth of 0.3% this year while the figures for Sweden and Denmark are, respectively, 1.7% and 0.4%. The rosiest outlook is reserved for Norway which is expected to experience growth of 2.2% in 2013, mainly on the back of its abundant energy reserves.