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Hopes rise on warmer US-Chinese sentiment

Traders hope that negotiations between China and the US proposed for September will hold the key to punitive trade tariffs being cut.

The big news since the last issue of RI was life being breathed back into trade relations between the US and China at the start of July. US President Donald Trump and the Chinese president Xi Jinping shook hands at the G20 Summit in Japan and agreed to resume negotiations, expected in September. Trump said his meeting with Xi had been ‘excellent’ and that the relationship with China was ‘right back on track’. In the meantime, the US says there will be no new tariffs on Chinese imports and China is reining back from imposing its own new tariffs.

Economic imperative

Observers believe the economic consequences of continuing the dispute forced both men to come together. In June, the International Monetary Fund calculated that the tariff war would cost US$ 455 billion in lost output next year – more than the size of South Africa’s economy.

To substantiate this, China’s economic growth in the second quarter of 2019 slowed to 6.2%, although that remains in line with Beijing’s target of between 6% and 6.5% for this year. Even so, this growth in gross domestic product was the lowest for nearly three decades. This has undoubtedly been affected by the US-China trade war. On the other hand, some Chinese data – fixed asset investment, industrial production and retail sales – was stronger.

US export trends

Latest data from the US Census Bureau and the US International Trade Commission indicates that US exports of aluminium scrap has more than exceeded the fall in scrap being sent to China. Overall, US aluminium scrap exports are up nearly 17% this year despite Chinese import restrictions.

From January until May this year, 764 828 tonnes were exported globally, well up on the 655 640 tonnes form the same period in 2018. To compensate for the 28% fall in Chinese transactions, exports to India are up more than 90% this year, with other significant gains including South Korea (+30%), Malaysia (+39%), Indonesia (+123%), Taiwan (+73%), and Mexico (+21%).

Official trade data also indicates that US copper scrap exports to China averaged 12 000 tonnes per month in April and May, up from just over 5 000 tonnes in January as shippers moved more material ahead of the 1 July import deadline. However, copper scrap exports to China so far this year (Jan – May) are down more than 75% (198 989 tonnes last year; 48 479 tonnes this year).

Although there have been significant increases to other countries during this period (Malaysia +263%; India +107% and South Korea +50%), overall shipments were down: 382 746 tonnes this year compared to 391 793 tonnes in 2018. Noteworthy is a reported 47% increase to Hong Kong.

Chinese quota changes

The situation continues to flux in China. The Bureau of International Recycling (BIR) reported in July that the China Solid Waste and Chemicals Management Bureau, part of the Ministry of Ecology and Environment, had issued import quotas for another 124 450 tonnes of high-grade copper scrap and 306 930 tonnes of high-grade aluminium scrap. The key metal-recycling province of Guangdong, which had previously received no quotas, was included.

BIR said it expected metal scrap companies in other provinces such as Jiangsu and Shandong provinces to be listed in the next quotas. In 2018, China imported a total 22.414 million tonnes of solid waste, down by 47% compared to 2017. Among this were 2.61 million tonnes of copper scrap and 1.56 million tonnes of aluminium scrap, according to customs data. 

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