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Virus alerts danger of unsustainable supply chains

A growing awareness of the risks of depending on other countries for key products or materials is one result of the Covid-19 pandemic according to the latest industry snapshot from the Bureau of International Recycling.

The global recycling body notes that China has lifted nearly all its lockdown restrictions but its factories do not have enough orders to operate at full capacity. Nor are there sufficient markets to supply.

BIR says buyers have become increasingly selective about the quality of scrap they purchase. ‘Some plastic recycling plants are going bankrupt and problems are being encountered with informal labour. In general, factories are producing at only around 30-40% of capacity.’

Demand will probably persist, it adds, with countries averse to buying from China not only because of virus fears but also as part of a bid to reduce their dependence on others – ‘something which could dramatically change the Chinese business landscape in the years to come’. 

In a boost for plastics recycling, however, BIR reports that oil prices are improving slowly but the costs of processing scrap remain greater than resale prices.

BIR accuses some port operators in India of not obeying government orders to grant waivers for ground rent. Overall, it says, India’s lockdown measures are slowly being eased and the expectation is that Indian industry will become fully operational in the next few weeks. 

The USA reports continuing supply-side challenges in the face of strong demand and the Environmental Protection Agency is urging the public to continue recycling, especially paper. Meanwhile, the industry has raised in Congress its concern about liability in the workplace and adequate insurance coverage.

Canada is focusing on a ‘green’ economic recovery with companies needing to show sustainability plans to access government funding. Ports on Canada’s west coast report a shortage of containers.

Europe gradually re-opens

In Germany, BIR understands that 35% of association members in Germany applied for government aid under the furlough scheme in preference to dismissing employees.
New car registrations in the UK plummeted 97% in April, highlighting the severe pressure that the pandemic is applying to the secondary metals industry. For recovered paper, the drop in UK volumes helped to boost prices and restore margins but collections are slowly resuming. In anticipation of a second wave of the virus, some mills have been overstocking.

In Spain, industry activity has increased by some 15% in the last two weeks. Depending on inputs, ferrous and non-ferrous operators are generally working at 30-50% of capacity, with very few nearing the more normal 60-75%. Heavy plants are at typically 40-50% while around 70% of car dismantlers are closed. Textiles recyclers are working at approximately 30% of capacity and municipal collections are suspended, while tyre recyclers are at only 20-30% of capacity because car repair shops are closed.
In the Netherlands, recycling has been considered an essential industry throughout the crisis and businesses are now running almost at normal capacities.

Industry across Poland has been severely affected by the pandemic and scrap collections have also suffered. Copper collection volumes were down 30% in March and 45% in April, while a fall of 25% has been recorded for tin, 50% for lead and 75% for aluminium. A survey of association members reveals a 30-55% decrease in scrap collections; for May, expectations are of a 35-40% decline compared to May last year. 

Half of the regions of Russia still have restrictions in place on scrap collections, leading to a sharp fall in volumes; these were 50% lower in April than in the same month last year and the same is expected for May. Overall demand for scrap metals has fallen 30%.

UAE export ban

The UAE’s decision to suspend ferrous scrap and recovered paper exports for four months concerns the Bureau of Middle East Recycling which has warned that local industry will be unable to handle all available scrap and thus exports will need to resume shortly. An improvement has been witnessed in UAE exports to India but some customers are unwilling to pay up while containers are still detained in ports while others have no liquidity.

The UAE economy is expected to reopen fully after Ramadan and Saudi Arabia is anticipating an increase in its currently very low scrap export volumes. The kingdom has increased VAT from 5% to 15% in July to help compensate for low oil prices.

Brazil is also worried about the UAE’s export restrictions and says it could retaliate. Meanwhile, industry closures have led to a 65% drop in scrap generation within Brazil.

With an easing of lockdown measures expected in South Africa at the end of May, some suppliers are pushing to move to shorter-term contracts to mitigate potential risks. Meanwhile, exporters are facing problems in obtaining export permits for ferrous and non-ferrous scrap.

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