BIR Global eForum: Holding onto hope in the nonferrous sector

Supply and demand for nonferrous scrap have been battered by the COVID-19 pandemic. Yet, panelists during a Bureau of International Recycling (BIR) Global eForum session expressed hope that China’s reclassification of high-quality nonferrous scrap slated for this July would be a positive development for global scrap processors and traders.

Atlanta-based Uni-All Group Ltd.’s David Chiao, president of the BIR Nonferrous Metals Division, described the situation surrounding the pandemic as “a crisis of many uncertainties.” He added that the current board of the Brussels-based trade organization would remain in place for an additional year to help navigate the organization and its members through this difficult time.

He said that while China’s recycled material reclassification is scheduled to enter force in China July 1, the country has yet to issue information in English about the specifications to be adopted or about how the change would affect CCIC (China Certification & Inspection Group) inspections. This statement was echoed by Shen Dong of OmniSource LLC, Fort Wayne, Indiana, who added, “Traders believe this new policy will have positive outcomes for the future of scrap trading worldwide.”

Under this shift in Chinese policy, any materials that continued to be classified as “scrap” cannot be imported into the country after Dec. 31, 2020, Chiao said.

During the last three months, nonferrous scrap processors and brokers dealt with significantly reduced incoming scrap volumes and demand from the automotive sector and other industries. Aluminum felt the brunt of the declines, according to panelists.

In North America, Rick Dobkin of Shapiro Metals, headquartered in St. Louis, said scrap flowing into yards had been slowed by reduced industry activity and virus-related safety restrictions. Inflows in the U.S. and Mexico had fallen by 35 percent to 70 percent of their normal volumes, while Canada saw a drop of approximately 60 percent.

Dobkin said the automotive industry in the U.S. was closed in April and much of May, adding that production was just ramping up as of early June. “Those that have started have found serious challenges with supply chain issues,” he added.

Dobkin said demand from Asia was good in May, though exports to India had diminished in light of that country’s lockdown measures.

Copper scrap was tight, he added, with exports headed to Europe and Asia. “Domestic brass demand is in line with supply.”

In Europe, copper and copper alloy scrap were in short supply during the lockdown period, Murat Bayram of U.K.-based European Metal Recycling Ltd. said. Estimates of metal scrap availability in May varied from 80 percent of normal levels in Sweden to just 50 percent of normal levels in Italy and Spain, which corresponded with the relative severity of these countries’ lockdown restrictions. “The more an area was affected by the virus, the less scrap that was flowing,” he said.

Bayram also mentioned difficulty in securing export containers in Europe and the higher prices associated with them.  

“The flow of scrap was stopped by less transport and no new production,” he said. “Smelters have postponed or canceled deliveries worldwide. Some aluminum producers trying to declare force majeure.”

Bayram expressed reserved optimism at the news of the Aurubis purchase of Metallo Group. “Metallo and Aurubis are important industry players. Our industry prefers to have more buyers than less. But if we look deeper into the deal, there might be a chance for our industry to benefit as well. It could enlarge the multimetal portfolio for Aurubis. Recyclability is not the primary consideration in the development of new products. If Aurubis does use more scrap and the harder to recover units, we could see more opportunity in the future.”

Dhawal Shah of Metco Marketing (India) PVT Ltd., Mumbai, India, said that country was expected to lose a “mind-numbing” 25 percent to 40 percent of its gross domestic product (GDP) in the first quarter of fiscal year 2020/21. He added that the country’s lockdown has been extended through June, adding that detention and demurrage charges from shipping lines and ports have “hit hard.”

During the panel discussion moderated by Susie Burrage of Recycled Products Ltd. in the U.K., Shah said Indian importers had been asked to pay substantial demurrage/detention costs when COVID-related disruption of banking services had prevented them from obtaining the necessary documentation to clear cargoes. The three shipping lines handling some 65 percent of import volumes were “in a position of power,” he said, adding that the situation necessitated developing a framework under which shipping lines should operate.

The country saw no automotive sales in April, while May sales were off by 80 percent.

COVID-19 “will have a long-lasting impact beyond the health issues,” said guest speaker Eugen Weinberg, a senior commodity analyst at Commerzbank, Frankfurt, Germany. He added that the pandemic had “massively accelerated” the deglobalization trend that began in 2010. At that time, world trade accounted for more than 60 percent of global GDP. Weinberg said domestic consumption now drives economies more than world trade.

He also predicted that the US-China trade dispute would possibly intensify rather than come to a resolution. “I don’t see clear and fast path to heal trade problems, particularly between the U.S. and China.”

Weinberg said he believes metal prices currently reflect “expectations of a swift recovery as we experienced back in 2010” as well as the “huge monetary stimulus by central banks worldwide” rather than the “real situation.” He added, “It’s not going to last. We have yet to come to terms with how bad the current situation is.”

By July or August, Weinberg said he expected “a big disappoint” as second-quarter figures would reveal the full extent of the crisis. “I hope I’m wrong about my expectations, but I think the worst is yet to come.”