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CMRA: Tension at the Table

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Scrap sellers and buyers trade concerns about cancelled orders.

November 12, 2008

Points of view were exchanged, but little was settled when scrap traders from China and North America met at a session called for by the China Nonferrous Metals Industry Association Recycling Metal Branch (CMRA) in Beijing in early November.

 

At the CMRA’s “Trade Seminar for Recycling Metal Import & Export under the Global Financial Crisis,” representatives from both ISRI and the BIR declared their disappointment and concern about the number of complaints they have received from their member companies about cancelled orders in China.

 

“It’s one thing to renegotiate, we understand that, and quite another to simply walk away,” said Bob Garino, a staff member with ISRI (the Institute of Scrap Recycling Industries Inc.). “We are concerned about the long-term trade implications. I’d be happy to look for a solution; I’d be happy to hear a solution,” he remarked.

 

A Chinese scrap trader at the seminar suggested that many of the cancelled transactions occurred when shippers sent scrap to China through smaller brokers and agents as opposed to working directly with consumers. “Those people who haven’t kept their word are import-export agents,” he commented. He also suggested that those sending scrap to China work directly with metal producers.

 

Robert Stein of Alter Trading in the United States, representing the Bureau of International Recycling (BIR), replied, “It doesn’t matter how scrap finds its way; that’s no excuse for the actions that have been taken.”

 

Several attendees suggested maintaining a list of disputed transactions and of the companies involved as a way to help avoid the continuation of such practices. Both Garino and Stein said, however, that such a practice would violate the confidentiality that ISRI and BIR promises to its members.

 

Regret was a commonly expressed sentiment. “It’s very unfortunate that, in some cases, the trust that has been built up over the course of a decade has evaporated in one month,” said Stein.

 

If the volume of cancelled orders is as widespread as is alleged, said a Chinese delegate, “then much of our effort in the last 20 years has been in vain. In business, credibility is more important than money.”

 

The problem is not universal, many delegates also commented, and broad brushes should be avoided. “We have not cancelled one single contract,” declared Tony Huang of aluminum producer Shanghai Sigma Metals. “We never re-negotiated and we haven’t missed a single payment.” His long-term credibility and reliability, says Huang, allows him to pay less on average for scrap. “Credibility is a secret of success.”

 

French scrap trader Marc Natan of Manco Consulting suggested more use be made of the BIR’s and ISRI’s arbitration services. Perhaps more knowledge of the arbitration process—as well as of risk management and contract law—could be distributed through printed materials or at events co-hosted by the CMRA in cooperation with the two groups, he suggested.

 

“It’s education,” said Natan. “With this bigger market, we have had a lot of new metal companies and traders starting in the last few years, and they don’t always know what kinds of risks they are taking. We need to speak the same language: Not Chinese or English or French, but scrap.”

 

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