Scrap policy reset in China part of 2021 metals pricing landscape
The People’s Republic of China churns out more steel, aluminum and copper than any other nation on Earth, so if its scrap consumption percentage rises in 2021, the ripple effects are likely to be noticed.
A late February online presentation by Ian Roper and Joyce Li of Shanghai Metals Market (SMM) touched on scrap use in several of China’s base metals markets, along with other trends affecting the nation’s output and use of steel, stainless steel, aluminum and copper.
For the past two years, China’s government was known for the barriers it was putting in place on imported scrap, with the clock ticking on a proposed outright ban for seemingly all types of metal and nonmetallic scrap Jan. 1 of this year.
The Chinese government ultimately decided against the self-imposed blockade. Instead, the nation set up a system that resulted in the return of considerable amounts of imported copper and aluminum scrap in the final two months of 2020, and the delivery of the first few shipments of ferrous scrap under a new “resource” classification.
Li said China is far from self-sufficient in copper, with its “self-sufficiency rate” having dropped from 40 percent in 2010 to 22 percent in 2019. The restrictions on imported scrap in 2019 and 2020 thus led to increased copper cathode and aluminum ingot imports into China by mid-2020.
Although scrap import volumes rebounded in November and December, Roper said red metal scrap imports into China dropped by about 300,000 metric tons in 2020. He said SMM expects a rebound in scrap imports in 2021, though it could be at the types of high prices that caused metals theft to become a problem in North America and Europe in 2012.
In the ferrous market, Chinese steel producers seem to be gravitating toward electric arc furnaces (EAFs) and other technology designed to lower emissions and to consume more scrap.
Even if Chinese producers import about 1 million metric tons of scrap in 2021, Roper said that is an amount that will make an impact in a region where mills in nations like Vietnam are bidding for the same scrap. The main effect, he said, could be “to lift global and regional steel scrap prices.”
Roper also said stainless steel, not electric vehicle (EV) batteries, was the biggest driver of nickel consumption in China in 2020. He said stainless producers in 2021 likely will be supplied by growing volumes of Indonesian nickel-pig iron and thus will have a limited appetite for scrap.
On the EV front, Roper said lithium-iron-phosphate (LFP) batteries are beginning to gain market share in passenger vehicles in China compared with ternary nickel, manganese and cobalt (NMC) battery packs. It is one reason, he said, SMM thinks nickel pricing EV euphoria “could be overdone at the moment.”
A question underlying all 2021 scrap purchase levels in China is the fate of that nation’s overall metals consumption strength in 2021. While China’s government spent money in 2020 to roar back from COVID-19, by August it was meeting with property developers to deliver a message about “three red lines” (debt-to-cash, debt-to-assets and debt-to-equity ratios deemed too high to cross).
Roper, who is based in Singapore, cited the “three red lines” policy on property loans as a potential barrier to steel consumption. Li, while considering copper’s consumption outlook in 2021, said China may have ended its “golden decade” of rampant apartment construction.
In both sectors, infrastructure spending could provide an alternative pathway to more metals consumption. However, Roper said he does not see “big infrastructure spending” as likely in China in 2021, though one “pocket of [metals] consumption” will involve urban subway and metro system build-outs.
Sims buys US aluminum processorSims Ltd. has acquired certain commercial and operating assets of Alumisource Corp., a leading aluminum processor and provider of furnace-ready products that is based in the Pittsburgh area. Sims is paying an initial $22.5 million for the company, with additional payments expected over the next three to five years using a predetermined earnout formula, according to a news release Sims issued about the purchase.
Alumisource provides raw material inputs to the aluminum industry in the form of custom shredded and blended aluminum scrap, according to its website, www.alumisource.net. “Through careful sourcing, inspection and processing, we are able to provide a unique aluminum scrap alternative that can be used as feedstock in either reverb or rotary furnaces,” the website says.
The company also supplies the steel industry with raw materials for artificial slag conditioners, deoxidation and desulphurization products.
Alumisource is based in Monessen, Pennsylvania, which is 30 miles south of Pittsburgh, and operates a plant in Richmond, Kentucky, about 30 miles south of Lexington, Kentucky. Both plants have rail access, multiple truck loading docks and certified 70-foot truck scales, according to the company’s website.
The net increase in Sims’ North American metal division’s nonferrous retail sales volumes is forecast to be approximately 33,000 metric tons as a result of the purchase. Sims Metals’ nonferrous retail volumes were 140,000 metric tons in the 2020 fiscal year.
Alistair Field, CEO and managing director of Sims, says, “I’m pleased to achieve this key milestone toward delivering our strategic targets and growing nonferrous retail volumes in North America. Major aluminum customers in the United States continue to seek product that is suitable for direct charging. Alumisource meets these needs by providing ‘in-spec’ furnace-ready product in an automated and safe manner.”
Field says Alumisource’s founder and CEO Gabe Hudock will continue to manage the acquired company for a minimum of three to five years. He adds, “Sims has a longstanding relationship with Alumisource, and I know the culture that Gabe has cultivated around safety and sustainability fits well with our overall culture and our focus on safety.”
According to a transcript prepared by Seeking Alpha of Sims’ Q2 2021 earnings call, Field said the purchase “is a great step forward to increasing our volumes of processed nonferrous products.” He added that the purchase gives Sims the ability to directly supply its aluminum smelting customers. “And that’s a really key step for us. So, I think, the processing skill set that we’ve acquired but also the growth potential is really what we’ve been seeking.”
M.A.R.S. celebrates 50 years of recycling and demolition activity
Dwight “Butch” Caton Sr., the founder and sole owner of Louisiana-based Modern American Recycling Services Inc. (M.A.R.S.), says he is proud to be celebrating both 50 years in business and his five appearances on Inc. magazine’s list of fastest-growing privately held companies since 2009.
M.A.R.S. was founded in 1971 with a mission to provide quality demolition and recycling services to customers seeking oil rig decommissioning and dismantling and large-scale recycling “of all types of vessels” while protecting the environment, according to the company.
M.A.R.S. says it has recycled nearly 10 million tons of offshore oil and gas structures and salvaged more than 10,000 barges, plus “hundreds of ships of various sizes,” since it was established.
The company has grown from five people based in Ohio and Alabama to 350 associates in the Gulf Coast region, where it has had its headquarters in Gibson, Louisiana, for the past 30 years.
In addition to its Gibson headquarters, M.A.R.S. has facilities in Mobile, Alabama; Jacksonville, Florida; Houma and Waggaman, Louisiana; Pascagoula, Mississippi; and its first overseas facility in Frederikshavn, Denmark.
M.A.R.S. says its European business unit employs 85 people with the potential to grow to more than 300 employees with the help of an international sales team based in the Netherlands.
“While the company’s services and operations have expanded, our underlying principles have remained constant,” M.A.R.S. says.
Looking back at its 50 years in business and its motto, “Recyclers Who Care About Your Future,” the company says its management team and employees “are committed to quality, safety and preserving the natural environment.”
Butch Caton adds that he and his wife, Kristi Caton, would like to thank all the company’s associates and clients “for trusting them with their recycling needs over the past 50 years.”