Eastward directions

The trade of scrap metals to and from many eastern countries that are part of the European Union (EU) has been described as complicated for a variety of reasons. Besides the fact that the region continues to emerge from a prolonged recession, issues pertaining to the transport of scrap metals and lackluster scrap sales also are concerning traders.

Even so, recent figures from Eurostat indicate that some nations located in the more eastern regions of the EU may have healthier economies in terms of gross domestic product growth (GDP).

But there are challenges, traders say. Some Eastern European nations, particularly those that joined the EU in more recent years, appear to be concerned about imports of scrap, lumped in as “waste,” to prevent dumping.

Overly strict adherence to the EU’s policy on transboundary shipments of waste and how the related Annex VII document is implemented also has been cited as a growing concern.

Meanwhile, Eastern European countries that are not members of the EU, such as Russia, the Ukraine and Belarus, have imposed restrictive export duties or taxes on various scrap metals for years. And escalated geopolitical tensions in Ukraine over the past several months have only added to these struggles.
 

By the numbers

From a broad economic perspective, indicators in the Eastern European region seem to show that this part of Europe is faring slightly better than its Western counterparts. Figures from Eurostat, the reporting agency for the European Commission, indicate that some of the strongest GDP growth rates recorded in 2013 can be found in its Eastern European member countries.

Latvia, Romania and the former Yugoslav Republic of Macedonia, for example, posted 2013 GDP growth of 4.1, 3.5 and 2.9 percent over 2012.

This compares to GDP growth for 2013 of -1.9, -1.2, 0.4 and 0.2 percent for Italy, Spain, Germany and France, as reported by Eurostat.

More recent GDP figures from Eurostat show that Hungary’s GDP was up 3.9 percent in the second quarter of 2014 compared with the same period of 2013. That is three times more growth than experienced in the EU-28 for the same period. Other strong performers for the second quarter were Lithuania, Poland and the Czech Republic.

Throughout the rest of the EU, only the United Kingdom exhibited a growth level that rivaled those numbers, with second quarter GDP growth of 5.5 percent, according to Eurostat.

Industrial production in the manufacturing sector for the second quarter of 2014, as measured by Eurostat, also looks to be relatively strong throughout Eastern Europe, with countries such as Poland, Slovakia, Romania, Lithuania, Latvia, Hungary and the Czech Republic posting significantly better indices than more western nations, such as Italy, Greece, Spain and Sweden.
 

Trade restrictions

However, traders and processors of scrap metals throughout the EU have expressed concern with the logistics component of the scrap trade.

Robert Voss, chairman of the Bureau of International Recycling’s (BIR’s) International Trade Council and CEO of the U.K.-based trading firm Voss International, says that while scrap metals are technically freely traded among EU countries, transport difficulties and risks are adding difficulties for buyers, sellers and traders.

Voss says interpretations of the EU trade legislation governing the shipment of “waste” appear to be varied.

“The implementation of the directive from Brussels is up to the bureaus of the independent countries,” says Voss, adding, “Some are implementing it more strictly than others, and most countries are tightening up now.” He refers to the EU regulation regarding the transfrontier shipment of waste, which includes scrap metals, and the related Annex VII document that must be physically present on all shipments. He says if a shipment gets stopped and a documentation discrepancy is found, it can take months for the containers to be returned, and exporters also can be hit with hefty fines.

“When you’re crossing borders, you take the chance that one country involved may restrict the export of the materials. Therefore, it’s no longer a free-trade zone, and it becomes a risk,” Voss explains.

“Some countries have always been very stringent,” he says, noting that others are apparently joining their ranks as more have realized “it’s not a level playing field.” Voss surmises that regulatory pressure to implement the Annex VII document checks more strictly also has increased in some EU countries.

He says, “One of the risks is that some countries can see this as a method of raising revenue by implementing fines if the documentation is not completed correctly—or if they think the documentation is not completed correctly.” Voss says this may be occurring throughout the European Union.

Voss says that while transport situations like this don’t happen every day, the risk still is present. Documentation in which a person’s name is misspelled even by one letter, for example, could lead to delays and fines.

“It could take you six months to get your goods back,” he says.

The risks can increase when shipping longer distances, though Voss notes they are not necessarily exclusive to countries in Eastern Europe.

Another recycling industry executive who echoes these concerns is Jeffrey Kimball, the commercial director of Loacker Recycling Group’s Hungary office in Budapest.

“It’s supposed to help environmental agencies track shipments of waste, but unfortunately they’re devoting a lot of resources ‘tracking’ absolutely harmless waste shipments,” he says, referring to the Annex VII document. “We have a lot of reporting overlap in our industry.”

Kimball explains that in addition to monthly reporting by product and by country to the EU, various local authorities also request similar information. He says he believes that government agencies should coordinate these reporting requirements and, instead of tracking millions of tons per year of raw materials used by industry, should concentrate their energies on issues surrounding problematic waste arisings, shipments and illegal disposals.

“As all member states collect the data differently, the efficiency of the current Annex VII accompanying document is questionable,” Kimball says. “When we have to put all source and end-user details on a document which accompanies the goods, it’s an administrative barrier and a breach of commercial secrecy. Every party to the transaction has full access to proprietary commercial information,” he adds.

Another barrier, Kimball says, is tighter control of metal flows prompted by metals theft. Kimball refers to the mandated daily reporting that all metal traders active in Hungary are required to provide to Hungarian customs authorities on every transaction as an administrative burden that also can lead to delays and fines. “It’s a bit intrusive, but I hope some good is coming of it,” he says.

Finally, Kimball refers to import restrictions that continue to be in place in countries such as Romania and Bulgaria, which joined the EU more recently. The barriers were intended to prevent the import or dumping of waste to the countries’ landfills, he says, but they also unwittingly affect scrap metals.

“Every shipment of waste, including scrap metal, has to be registered and handled almost like hazardous waste in order to import it,” says Kimball.

These requirements continue for the time being in places such as Bulgaria and Latvia, though some are scheduled to be removed at the end of 2014 (Bulgaria) and late 2015 (Romania).

At the moment, according to Kimball, “This for them is a real barrier to trade because it hinders local industry and local smelters.” Consumers in those countries working to source metals abroad have to go through dramatic administrative hurdles that can take months, he adds.
 

Trading challenges

The current political tensions in the region notwithstanding, Eastern European countries that are not part of the EU continue to pose trading challenges. Voss says many non-EU-member nations continue to uphold export restrictions on scrap.

“There’s still a significant ban on exports, which seems to be Russian-led, and it seems to be growing,” says Voss.

However, the current geopolitical crisis in eastern Ukraine hasn’t seemed to change trading patterns through the rest of Europe.

“From what we’re seeing in Eastern Europe, the Ukraine situation doesn’t affect us that much,” says Kimball. “Trade between Ukraine and neighboring countries is virtually zero,” he says. “It’s been this way for some time.”

Michael Schneider, press officer for Remondis in Germany, says the company’s business efforts in the Ukraine and Russia were less than stellar even before the current crisis.

One problem, he says, has been reliability of doing business in some regions. “You can’t really be sure if the contract you signed two years ago will still be valid today,” he says.

Remondis trades scrap metals as well as plastics and paper scrap. Schneider says in recent years the company has retreated from its business interests in Russia and the Ukraine to some degree.

He adds, “It’s a difficult business.” Schneider says the company originally had higher hopes for the strengths of these markets since it entered them in the early 1990s.
 

Economic differences

Voss says Eastern European nations, like the rest of Europe, are not exactly booming when it comes to the scrap recycling business. He says the biggest economic problem is on the sales side.

“Scrap sales are very difficult around the world, not only in Europe,” he says. With most of Europe still fighting towards recovery, and China no longer a significant buyer of nonferrous metals from Europe, “there seems to be plenty of material available in Europe, and it’s very difficult to find good markets for these,” Voss adds.

However if there is an exception to that generalization, says Voss, it would be Poland. The country has had a fairly strong consumer market in recent months. Furthermore, the nation on the whole has been a significant buyer of copper scrap.

“I believe demand there is reasonably good,” Voss says. However he quickly tempers that statement: “If you’ve got limited demand in the East, which is the traditional market, then material will stay within Europe and quickly fill up the European consumers.”

For his part, Kimball says Loacker’s exports from Hungary have been stable over the past several years. The Austrian-based company now has three scrap yards in Hungary and one in Slovakia, plus dozens of others in Southern Germany, Austria and Switzerland. He says Hungary is a net exporter of everything except primary grade aluminum scrap, which is typically consumed internally. Kimball also says the country exports around 1 million tonnes of ferrous scrap and about 25,000 tonnes of copper scrap annually, the majority of which remains within the EU. Most of Hungary’s ferrous scrap is exported to Italy, followed by Austria, Slovenia, Slovakia and, more recently, Turkey.

In fact, Kimball says, while scrap flows from Hungary haven’t changed much, Turkey’s entrance as a buyer a few years back was a noticeable change. “Back then it was really exotic. Now,” he says, “it’s an everyday event.”

The author is managing editor of Recycling Today Global Edition and can be reached at lmckenna@gie.net.