maersk container hong kong
Scrap cargoes are mostly moving unimpeded, but not enough by volume to suit traders and recyclers.
Photo by Brian Taylor.

BIR Global eForum: Supply plummet is biggest disruptor

A scarcity of scrap to ship and sell has been COVID-19’s most serious market issue; India’s severe lockdown also caused turmoil.

June 3, 2020

When the Brussels-based Bureau of International Recycling (BIR) International Trade Council convened a panel of nearly a dozen traders and recyclers on June 2 for a webinar, there was agreement that materials were still trading globally—just not in great enough volumes.

Despite COVID-19 lockdown issues, tariffs, trade disputes and talk of economic “decoupling” from China, the widespread drop in generated scrap has caused the most concern. “There are challenges in terms of markets, but demand relatively has held up not too badly,” said Tom Bird, BIR’s president. “One of the big impacts that has come across loud and clear has been the [lack of] supply of material coming through the system.”

“Automotive and civil engineering-related materials have been affected in terms of collection and sales,” stated Max Craipeau of Hong Kong-based trading firm Greencore Resources Ltd. “Recyclers have lower collections from these segments.”

“Due to the lockdown throughout Europe, we switched from an oversupplied market to over-demand,” commented Sebastien Ricard of French paper and board recycling firm Paprec Group. “There was a high demand for packaging [regionally], and soon we weren’t shipping much to Asia.”

As lockdowns have lifted, first in China and then in Europe and the United States, scrap generation has revived incrementally, said panelists. Thomas Papageorgiou of Greece-based electronic scrap recycling firm Anamet Recycling Industry SA, remarked, “April, in terms of sourcing material, was a disaster. May was a little better. We are hoping for better yet in the near future.”

On the trading front, turmoil emanated from Indian Prime Minister Narendra Modi’s decision to enact a sudden and comprehensive lockdown in that nation. Modi’s list of essential industries during the multiweek lockdown did not include seaports, banks or courier services, according to panelists.

“The biggest issue we’ve had with countries is with India, only because it had such a hard shutdown,” said George Adams of United States-based SA Recycling. “We couldn’t get [access to] docks, they closed banks, they closed FedEx. India has been our biggest struggle, but we are now starting to get our contracts there [moving again],” added the metals recycler.

With so much shut down in India, “Banks didn’t want to take DPs [documents against payment] for India,” said Mark Sellier of Hong Kong-based nonferrous trading firm Global Metals Network. With containers clogged in ports and paperwork hard to gather, “Late documents can mean demurrage charges and other late fees,” he added.

Greg Schnitzer of U.S.-based Schnitzer Steel Industries also singled out India as having been “a hassle.” Adams said this was in contrast to other major ferrous scrap destinations. “Even Peru, which shut down a lot, they kept unloading ships. Containers never really stopped into Taiwan. I feel fortunate on the ferrous side. Other than purchasing the scrap, other parts [shipping and selling] were not so impacted.”

Panelists said in India and beyond, traders largely acted in good faith to uphold contracts or agree to delays that were beyond the control of either party. “This is a different situation than in 2008. This is more of a movement or situational crisis,” said Schnitzer.

Sellier, reached by Recycling Today after the webinar, agreed. “This is totally different from the financial crisis in 2008,” he stated.

BIR International Trade Council Chairman Michael Lion, who moderated the webinar, commented, “I think people are struggling to do the best they can, as I think they largely did in 2009. Of the various forms of dispute resolution, the best way is to do so in a conciliatory fashion.” Lion and Bird are affiliated with Hong Kong-based trading firm Everwell Resources Ltd.

Both Lion and Sellier noted the BIR has an arbitration service that can be used, but Sellier said by the time a dispute reached that stage, “it is likely to end your relationship.” Added Sellier, “I’ve asked a third party to come in and mediate. You can do that—go and find a ‘wise man’ for mediation. You need to take into account the other cultural point of view if you’re going to try to find a reasonable solution, and both parties can walk away and continue to do business.”

A trade issue that may gather steam beyond the COVID-19 era involves reports that multinational corporations are seeking to reduce their manufacturing footprints in China. In nations including the U.S. and Japan, this could get a boost from government inducements or pressure.

Craipeau said he has “two Japanese clients who want to take advantage of our factory in Indonesia [which makes recycled-content plastic pellets]. They are already planning some moves. They are already looking at Southeast Asia as an alternative for plastic compounding in Asia.”

Commented Bird, “I think when this pandemic has relented somewhat, there is going to be a review of ‘decoupling’ of industry from China. And I think that in itself is going to be an interesting period. We know there have been issues, plus the regulations affecting our industry directly. We are hearing things from the U.S. and Japan about a decoupling. I think that’s going to be the main subject with all this going forward.”

Panelist David Chiao of Atlanta-based nonferrous metals trading firm Uni-All Group remarked, “I used to say, ‘China may be out of the market, but China is not out of the equation.’ Mixed metal scrap is not going to China by the end of this year; a lot will be banned. But, China is consuming all the [finished and semi-finished] metals. I look at it as China moving pretty much to the way Japan is right now. It is a big change, but [China] is still consuming the finished metal.”