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China issues generous import quotas for metal scrap

China has massively increased the tonnage of foreign metal scrap it will allow to enter the country under the latest import quota allocation, this year’s twelfth batch, according to the latest bulletin released by China Solid Waste and Chemicals Management, the country’s import window for ferrous and nonferrous scrap.

The bulletin issued by China Waste Management on September 17 gave approval for 136,335 tonnes of copper scrap to be imported by year’s end, much higher than under the previous quota allocation of just 14,530 tonnes awarded on August 18. Also, permission was granted for the import of 121,285 tonnes of aluminum scrap, against the tiny 2,610 tonnes granted in the previous award, Mysteel Global noted. The scrap must be imported and clear Customs before December 31 this year.

“This was the first batch for the fourth quarter, and the first batch in a new quarter usually sees a large volume allocated,” a Beijing-based market source told Mysteel Global. “It’s just as we saw in the first quarter, it’s a sort of rule,” she stated.

The first batch of quotas for this year’s Q1, issued last December 24, allowed domestic enterprises to import 270,885 tonnes of copper scrap and 275,465 tonnes of aluminum scrap, much higher than the current batch, according to China Waste Management data.  The Beijing source predicted that import quotas for metal scrap for the rest of the year would not be very large.

And nor is this latest quota likely to present windfall business for anyone either, Mysteel Global notes, given that the Cu scrap quota is shared among no fewer than 150 scrap collectors and processors – an average of 900 tonnes each – and among 60 companies for the Al scrap allocation.

A market source in East China’s Nanchang province agreed that China Waste Management’s allocations going forward would likely be smaller, also pointing out that total scrap imports are lower than allowable under the quotas. “By the end of July, China’s actual copper scrap imports reached some 500,000 tonnes, however the total approved under the import quota system was nearly 800,000 tonnes,” he stated.

The market insider attributed the lower imports to the negative effect from the pandemic globally since March, saying “the virus outbreak has largely affected scrap imports.”  China’s nonferrous scrap imports mainly come from Southeast Asia where the economies of countries such as Thailand, the Philippines and Indonesia have all been savagely hit by the virus outbreak and subsequent business lockdowns.

He reiterated that the new standard drawn up by China’s central government re-classifying nonferrous metal scrap is expected to take effect by the end of this year.

Meanwhile, in stark contrast to the large import quota for nonferrous scrap, last week’s bulletin from China Waste Management showed that the quota for steel scrap was tiny – with only seven scrap and waste processing companies sharing an import quota of just 2,610 tonnes, Mysteel Global noted. Admittedly, the ferrous scrap allocation this round was a marked improvement on the previous batch in August – where no quota for steel scrap was awarded at all – yet the overall import quota this time remains relatively low.

A Shanghai-based analyst noted that import quota for ferrous scrap was much smaller than that for nonferrous scrap because the profitability for the latter was much higher.

“We are not surprised at such lower quota actually, as the issue of Beijing’s designation of steel and metal scrap as ‘foreign garbage’ remains unresolved,” he noted to Mysteel Global, adding that the small quota would go little way towards easing the domestic scrap market’s supply tightness or satisfying market demand.

On the other hand, a scrap trader from East China commented that considering the laborious application and approval processes, few in his industry are enthusiastic about winning China Waste Management’s quota. “We were not willing to take too much time to apply for the small quota, unless the imported scrap restrictions were lifted,” he told Mysteel Global.

However, when China might return to the steel scrap import business in a major way remains unclear. “We were expecting that the curbs currently hindering ferrous and nonferrous scrap imports could be relaxed as early as 2021. Nevertheless, due to the COVID-19 and uncertainties in the international market, the release time will be delayed,” a market participant in Liaoning, Northeast China, warned.

Written by Lindsey Liu, liulingxian@mysteel.com and Anna Wu, wub@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com

 



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