China metal recyclers to divert, sell US cargoes

Looming duties threaten to disrupt trade for top scrap consumer

Chinese copper fabricators and importers are scrambling to divert or resell cargoes of US copper scrap en route to China, after the Asian powerhouse hit such imports with a 25 percent duty amid the deepening trade row between the world’s two largest economies, sources said.

US scrap metal, waste paper and plastics cargoes arriving in China from August 23 will incur the new levy after China announced on Wednesday its final list of tariffs on $16 billion worth of US goods. Scrap was not on the draft list released in June.

In the first quarter of this year, there were almost 2,200 cargoes of copper scrap per month sent to China from the US, according to Reuters’ calculations. The average cargo of scrap copper sent to China is about 20 tons.

Those importers with stranded cargoes will likely have to offer discounts to attract buyers, sources said.

“The impact will be draconian on both US scrap processors and Chinese consumers,” Michael Lion, Hong Kong-based president of Lion Consulting Asia and a Chinese metals industry veteran, said in an email.

Companies such as Sims Metal Management and Nucor Corp’s scrap subsidiary David J Joseph are major exporters of US scrap to China and elsewhere.

Last year, the US sold almost $6 billion worth of scrap commodities to the Chinese mainland and was the second-largest supplier of copper scrap behind Hong Kong, exporting 535,371 tons worth roughly $1.8 billion in 2017. Hong Kong sent 627,180 tons.

The global recycling sector is also reeling from China’s tighter restrictions on waste imports introduced over the past year. China’s scrap metal imports dropped by one-third in the first half of 2018 to 2.86 million tons.

An executive with a major scrap metal recycler in Asia said there would likely be a combination of re-sales, transshipments and reluctant payment of the 25 percent tariff.

“Those that can resell may see [that] as the best option, even if at lower numbers, as there is always risk within trans-shipment,” the source said.