A Wall Around China

Unhappy with U.S. restrictions on steel imports, China may have shot a trade volley back at the nonferrous scrap market, placing a duty on imports of many low grades of nonferrous scrap.

A substantial tariff announced in late May on what China calls “Class 7” copper scrap has blocked a number of containers of copper scrap from entering the country and placed the status of those in transit in question.

According to one U.S.-based nonferrous broker, the Chinese government has targeted what it calls Class 7 scrap, which includes most lower grades of copper scrap such as unprocessed wire and die cast alloyed parts. The tariff is seen as a way to influence U.S. policy makers.

Other published reports indicate that the blocking of nonferrous scrap shipments is related to the Chinese government’s ongoing efforts to restrict the flow of electronic scrap into the country, due to environmental and safety concerns.

Speculation has even included theories that the tariff has been enacted to force the smelting industry in China to use higher grades of scrap as a pollution prevention measure.

Currently, customs officials are taking the tariff seriously. Should the policy stay in place for very long, it could have severe consequences for the U.S. copper scrap trade. “It’s a high retaliatory tariff that makes [exporting] prohibitively expensive,” says one U.S. broker. The Chinese government “really just decided to hammer this tariff down across the board. It’s a pretty severe measure,” the broker adds.

American dealers of copper scrap have expressed concern over the news. China has absorbed an increasing amount of copper-bearing scrap generated in the U.S., as there very few domestic consumers remaining for lower grades of scrap. “If it were easy to clean, it would be consumed domestically,” the broker remarks. “My customers are very concerned; they have been calling me all day.”

The broker interviewed will be severely limited in terms of finding a home for generated scrap. “I'm really holding at minimal buying levels. Without Class 7 markets, exporters really can’t be in business--it covers most of our cargo. If the Class 7 tariff stays as a retaliatory measure, it’s going to be death, as far as we’re concerned."

How long the Class 7 tariff will remain in affect is now a high stakes guessing game.