PITTSBURGH — Non-ferrous scrap market participants in the United States are bracing for massive trade disruptions as a result of impending Chinese import restrictions - and a rumored quota system - set to take effect on July 1.
“From July 1 onward, all non-ferrous scrap importers must apply for import permits. How the process is going to be put into place - and the number of quotas for importers, and the qualifications for importers - is unknown. As a result, Chinese consumers are trying to push for enough quantity of material to cover them for the months of July and August in case there are any issues or if there is any delay in the process of import permits,” one US exporter said.
In December 2018, the Chinese government announced that it would restrict imports of certain grades of non-ferrous and ferrous scrap beginning on July 1, 2019, pushing the Asian country closer to a potential outright ban on scrap imports that could be in place by the end of 2020.
Copper scrap classified under HS code 7404000090; aluminium scrap classified under HS code 7602000090; and six grades of steel scrap have been targeted, the Ministry of Ecology and Environment said. These items will shift from the unrestricted category to the restricted imports category of solid waste products for use as raw materials.
Sparse details regarding the restrictions’ implementation procedures and delays on issuing new import licenses have created mass uncertainty in the market, with many fearing that trade with China could come to screeching halt in the coming months.
“There is a frenzy going on right now to get scrap shipments to China out of the US in April. Chinese consumers’ current import licenses are expiring at the end of June. Some have tried to submit applications for new licenses; however, their applications have been returned and they’ve been told by the government to apply at a later date. This raises concern that the new import licenses won’t be processed in time to have them for July 1, meaning imports could come to halt,” a second US exporter explained.
In fact, Chinese consumers shared similar views, noting that in recent weeks they have begun to issue notices to their suppliers to ensure shipments arrive and clear customs before July 1.
“Everybody is concerned over China’s new import controls for scrap metal. Right now, there is no detail on how the restrictions will be put into place. We are asking US yards to push the loading date. We are aiming for no later than the middle of April or early May at the latest. But we are scheduling to ship some material early because it has to be trans-loaded,” one Chinese trader said.
At the same time, the urgency to get China-bound material shipped out of the United States by the end of next month has left industry participants wondering what trade activity will look like in May and June.
“We’re going to see some major disruptions after the second half of April. Chinese buyers are telling us that material has to arrive at the ports by June 15, so they have time to clear customs before the July 1 restrictions,” a third US exporter said. “When you factor in a typical 30-day order and the rail time required to get material to US docks and shipping time to get material across the ocean to China, there’s not a lot of spare time left."
Until more details emerge regarding the quantity of import licenses and the parties eligible to receive those licenses, the impacts of China’s restrictions will remain unknown.
“We need some clarity with China. They’re the biggest non-ferrous scrap consumer in the world, and if they really go out of the market, this is going to destroy prices,” one US supplier said.
Category 6 copper scrap, which is a furnace-ready material and does not require further dismantling like Category 7 copper scrap, accounts for an estimated 85% of total Chinese copper scrap imports.
China was said to be considering a ban on imports of solid waste, including all metal scrap, by the end of 2020, according to policy documents.