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Assessing the cutting edge of China's 'National Sword'

Aug 31, 2017 | 08:00 PM | Fastmarkets AMM staff

Lingering uncertainty over the potential ban has the industry in limbo and some prices under pressure as more material is left in the U.S. market.

Uncertainty stemming from China’s National Sword initiative is having a direct impact on mixed nonferrous metals trade in the United States, according to the Bureau of International Recycling (BIR).

“China’s National Sword initiative has impacted the zorba and zurik markets. Certain qualities of zurik are now being held in inventory as producers look for alternative markets and new processing technology to make a better quality and to further separate its component metals,” Andy Wahl, vice president of the Brussels-based association’s nonferrous metals division, said in its World Mirror on Nonferrous Metals report.

All eyes have been on China as the nation takes steps to crack down on pollution related to the processing of imported scrap.
While there has been no public announcement by the Ministry of Environmental Protection regarding any specific bans on nonferrous items, concerns in the industry are mounting especially as the scrap-consuming giant has already had other recycled products like paper and plastics in its crosshairs.

China submitted a document to the World Trade Organization in mid-July informing it that the country would no longer take in any “foreign garbage,” such as slag from steelmaking and many kinds of waste wool, ash, cotton and yarn.

The China Nonferrous Industry Association also informed its members in late July that China would prohibit the import of scrap materials listed in the seventh category under customs HS code before the start of 2019. Included in this category are scrap products that require further processing or dismantling and cannot be directly charged in a furnace, like wire, cables and other metals.

Lower qualities of insulated copper and aluminum wire products also might not pass any new standards expected to be applied to imported metal items, Wahl said.

Lingering uncertainty over the potential ban has the industry in limbo and some prices under pressure as more material is left in the U.S. domestic market.

“The zorba market is wary of this initiative, although the general consensus among producers is that there should not be any issue for those producing high-grade zorba of 95/3 (95-percent metallic/3- percent red metal content) or better,” Wahl said.

The effects of increased zorba supplies has trickled down to twitch prices as well, which slid through July to reach a six-month low in the U.S.
“With fairly good zorba availability in the domestic market, twitch prices have dropped as supply and demand is helping secondary consumers increase their buying margins, although ingot sales are not lower but quantities are limited,” Wahl said.

However, the BIR is urging the industry to ignore rumors surrounding China’s import intentions until an official announcement is made.

China’s Ministry of Environmental Protection “has put on hold the scrap import permit renewal-extension approval procedure for mixed metal until July’s thorough environmental inspection program is completed across the country. I urge everyone not to repeat hearsay; let us wait for the official announcement,” David Chiao, president of the BIR’s nonferrous metals division, said in the report.

Closer to home, sentiment among U.S. scrap market participants remains cautiously optimistic for the balance of the year despite downward price adjustments in rebar and hot-rolled coil, and the auto sector losing some steam, a top Bureau of International Recycling (BIR) executive said.

“Although the auto industry may perform less robustly in 2017 when compared to 2016, steel shipments have climbed 6 percent year on year and construction demand is still expected to achieve a 3-percent increase this year,” William Schmeidel, the BIR’s  ferrous division president, wrote in a quarterly report.


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