BIR non-Ferrous World Mirror September 2015

Global – The stock market slump in China and Beijing’s decision to devalue the yuan have contributed to a ‘very depressed’ market, according to David Chiao, president of the BIR non-ferrous metals division. Inventories are mounting in almost all Chinese importers’ yards while consumers ‘are lacking confidence in the economy as well as in the leaders in Beijing’, with some fearing a further currency devaluation.

A report from Ma Hongchang, expert advisor on Chinese policy and regulatory developments, notes that China’s annual non-ferrous scrap imports have fallen by around 1 million tons since 2010, with the copper scrap total dropping over 10%.

‘The difficulty faced by China today in importing scrap is that the country no longer enjoys a low labour cost advantage, plus it has higher energy and land costs as well as restrictive import controls compared to India and South East Asian countries,’ it is pointed out. ‘Domestic collections have increased every year to replace some of the import volumes.’

Expectations for the coming years, Ma adds, include: even less dependency on imported scrap; more limits on those scrap materials permitted for import; restriction of import permits to stable and reliable importers; and centralisation of all scrap processors in government-managed industrial recycling zones. In the short term, however, ‘there is no immediate replacement for non-ferrous scrap imports, both in terms of quantity and quality’, he says.

The weaker Chinese economy and lower oil prices have also undermined other markets in the region. In Thailand, for example, local demand for non-ferrous scrap is weak owing to thinner orders from China, Japan and India for Thai-made products such as vehicles and parts.

Aluminium ingot prices have reportedly fallen by around 4%. Meanwhile, Chinese aluminium alloy smelters’ offers of ADC12 for export to Japan have remained under pressure owing to poor demand. Elsewhere in Asia, many smelters and foundries in India are ‘extremely cautious’ about market prospects and are trying to shift to formula contracts, but this has proved to be ‘tough’.

In Australasia, consumers are in the market to buy but many small and medium-sized merchant operations ‘are reluctant to sell material’ at current price levels. The metals business is termed ‘very slow’ in the USA, with secondary ingot prices continuing to soften even with a short upswing on the LME; only aluminium mill grade scrap has seen minor price increases.

Reports from Mexico suggest ‘one of the few bright spots’ has been an upturn in aluminium scrap demand from the USA following several months of relative dormancy. Many companies in South Africa, meanwhile, are on short-time working of three or four days a week in response to lower demand.

Regional imports and exports remain a major challenge in the Middle East because governments and authorities ‘frequently’ give no prior notice of new regulations on the movement of non-ferrous scrap, resulting in ‘complications, delays and disruption to operations, logistics and delivery of products’.

For example, the Saudi Customs Authority at the port of Dammam has given strict instructions that all scrap export cargoes should be palletised and that all loose loadings would be rejected for export, although the issue has yet to be clarified through an official announcement.

Russia has cut export duties on non-ferrous scrap in line with its World Trade Organization commitments. Meanwhile, the country’s scrap community is calling on the government to eliminate income tax for individuals selling scrap to licensed companies – something which, it is claimed, would ‘help improve scrap collections all over the country’.

Activities in Western Europe, meanwhile, are regathering pace after the summer holidays. For many businesses in Italy, however, there were ‘fireworks’ on their return as August 24 saw steep drops on the LME, with subsequent price increases proving insufficient to kick-start full-capacity working.

These lower LME quotations ‘have stripped the market of any dynamism’, according to feedback from Germany. Availability remains tight ‘because no-one wants to sell expensively-purchased scrap at current price levels’. For the same reasons, markets in the Nordic Countries are in ‘wait-and-see’ mode ‘because the general expectation among many scrap dealers is that LME copper, aluminium and nickel should rebound at some point’.

In France, customers ‘are not buying much as they would rather wait and see’ while recent months have been ‘tough’ for recyclers in the UK as low supply of scrap has been matched by low demand and continuously falling markets.

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