Prices buoyant but global trade remains chaotic

Recyclers are watching developments in India and Malaysia as authorities look to boost the quality of secondary materials.

Read the full market analysis in our latest issue >>

It is the turn of India and Malaysia to be in the spotlight as its governments attempt to introduce tighter quality controls on secondary materials. National and international recycling organisations are concerned contamination thresholds proposed by Malaysia are unrealistic. In India’s case, the approach includes establishing a set of specifications and standards for domestically produced scrap.

These developments comes as prices continue to hold up well with economies generally recovering strongly from the Covid-19 pandemic. Even so, a number of factors weigh heavily, including continued problems of logistics in moving scrap, labour shortages and production industries struggling with stretched supply chains. For example, the past few weeks have also presented the European metal market with a very special challenge.

Rising metal prices require retailers to have higher financing requirements. This applies both to purchasing and to costs that arise such as higher default insurance. Customers’ payment terms are also becoming increasingly longer in practice, which means that the retailer not only has to finance more, but also over a longer period of time. Additionally, European industry has had to significantly reduce its production because of a lack of components from Asia.

One example is the important automotive industry. Although demand is high, factories are producing fewer vehicles due to a lack of spare parts. As a result, older vehicles are being driven longer, so less scrap from end-of-life vehicles is being generated.

‘PARADIGM SHIFT’

Higher quality standards for scrap in India and Malaysia were reviewed during the latest online trading forums organised by the Bureau of International Recycling (BIR). The Indian government is proposing scrap classifications in a bid to obtain cleaner, higher-quality raw materials and Dhawal Shah, managing director of Metco Marketing and the new president of BIR’s non-ferrous metals division, said brainstorming across the industry was anticipated with changes being implemented possibly within the next six to nine months.

A new Metals Recycling Authority (MRA) acting as a single interface between trade and government was expected. ‘We must try to improve the domestic supply chain but also realise that India benefits from imported scrap. I believe that in five to seven years we will see a paradigm shift in the secondary metal production industry in India.’

Looking more widely at the non-ferrous sector, Shah called the current trading conditions ‘chaotic’ and ‘completely unprecedented’. Challenges facing the sector include: metals prices at almost historical highs with intra-day volatility of up to 5%; supply disruption owing to container logjams; ‘skyrocketing’ prices for alloying inputs such as silicon, magnesium and manganese; semiconductor and energy shortages; and growing inflation.

MALAYSIAN FEARS

Another panellist Eric Tan of the Malaysia Non-Ferrous Metals Association warned that, in their current form, quality guidelines for importing scrap into his country introduced on 1 October would ‘cause more harm than good to the whole non-ferrous metals industry in Malaysia’. The key points of concern on which the country’s metals industry is continuing to lobby its government include thresholds of 0% contamination for hazardous/e-waste (China’s level is 1%) and 94.75% for metallurgical content which, Tan warned, would affect 80-90% of Malaysia’s scrap imports.

He argued that the proposed pre- and post-shipment inspection regime would damage Malaysia’s competitiveness in terms of scrap procurement. Others have argued these tight requirements will hit the flow of secondary metals and could have consequences for China as Malaysia is the biggest supplier of scrap copper, accounting for nearly 20% of Chinese imports.

Leeway for traders to adjust to the new rules has been extended until the New Year. Indonesia had previously dropped a proposed 0.5% impurity figure for 2% after opposition from BIR and the US-based ISRI.