As of March 2, Chinese scrap metal importers can apply for exemptions on tariffs of aluminum and copper scrap imports from the U.S. The policy is designed to help Chinese scrap metal consumers that have been challenged by the slowdown in economic activity in that country related to the coronavirus pandemic. According to Argus Media, the move likely will have little effect on markets given the nation’s import quotas on these scrap metals.
China issued its fourth batch of import permits for the year on March 7. According to China’s Solid Waste and Chemical Management Centre of the Ministry of Ecology and Environment, an additional 3,520 metric tons of copper scrap and 100 metric tons of aluminum scrap were permitted for import.
China-based Shanghai Metals Market (SMM) reports that 305,640 metric tons of copper scrap imports have been approved to date in 2020, accounting for 54.5 percent of the total 15 batches of import quotas in 2019, which totaled 560,600 metric tons.
As of March 7, 284,549 metric tons of aluminum scrap imports have been permitted.
“Certainly, it’s impacting terminal markets given the increasing fear of a global slowdown in terms of manufacturing.” – a Midwest-based scrap processor on the coronavirus
Argus Media reports that Chinese importers of copper and aluminum scrap from the U.S. can receive one-year tariff exemptions from the date their requests are approved.
The tariffs of 25 percent on copper scrap and 50 percent on aluminum scrap were initiated in 2018 as part of the U.S.-China trade war.
A scrap broker based in the Midwest says, “My understanding is that China is removing tariffs now to prime the pumps. They are trying to pull scrap in.”
A copper scrap processor in the Midwest mentions the coronavirus and its effect on demand from China and the availability of shipping containers. “Trying to secure a container is difficult; bookings are being pushed out further,” he says. “The interesting scenario will be to see how easy or difficult it will be to secure a container in a few months.” The processor speculates that the reduced container availability could last for three to six months.
In the aluminum scrap sector, a second Midwest-based processor says he hasn’t seen an impact on supply or demand related to the coronavirus outbreak as of early March. “Certainly, it’s impacting terminal markets given the increasing fear of a global slowdown in terms of manufacturing.”
European buying of the red metal has strengthened, sources say. The Midwest-based copper processor mentions increased interest from Europe as well as from the Middle East. “I think we are seeing all grades of copper and brass moving to new regions of the world.”
He adds, “There are multiple new homes that will consume copper internationally, although nothing compared to the volume that China used to.”
While the copper processor says domestic demand seems to be better than it was a few years ago, he adds, “Now that China is not consuming as much copper and brass, it is tough for North America to consume as much as we generate.”
This is leading to an abundance of high-grade copper scrap domestically, which means most consumers can get whatever they want, making low-grade material less desirable, the processor says.
The domestic market also is well-supplied with aluminum scrap, putting domestic mills “in a position of power relative to the numbers they are quoting,” the second processor based in the Midwest says. “So, processors have to be smart about how they sell and how they separate themselves from a competitive supply market.”