As per ISRI’s Member Alert last week: “In apparent retaliation for the U.S. Administration's announcement of tariffs on Chinese products to begin in September and December, the Chinese government announced its intent to levy additional tariffs on $75 billion worth of goods from the United States. These tariffs add on to those already in place from announcements in 2018.
Included on the list are the following scrap commodities to be assessed an additional 5 percent tariff beginning on December 15, bringing the total import tariff to 30 percent:
Harmonized
Tariff Code Product Description & Corresponding ReMA Specification
4707.10.00 ... Unbleached kraft paper or paperboard or corrugated paper or paperboard (e.g., paper grades 4, 5, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21; and specialty grades 8-S and 11-S).
4707.30.10 ... Paper or paperboard made mainly of mechanical pulp (for example, newspapers, journals and similar printed matter); newspaper and other. (e.g., paper grades 9, 10, 22, 23, 24, 25, 26, 27, 44, 56, 58; and specialty grades 25-S, 32-S, 33-S, 36-S).
4707.90.00 ... Other, including unsorted waste and scrap (e.g., paper grades 52, 54; and specialty grades 1-S through 7-S, 10-S, 12-S, 14-S through 20-S, 22-S, 31-S, 34-S)
Note: It is our understanding that unsorted mixed paper is banned for import into China, but in instances where materials under this Harmonized Tariff Code are still obtaining clearance, the tariff would apply.
7001.00.00... Cullet and other waste and scrap of glass.
7404.00.00 ... Copper waste and scrap (e.g., All copper grades).
7602.00.00 ... Aluminum waste and scrap (e.g., All aluminum grades).
Included on the list are the following scrap commodities to be assessed an additional 10 percent tariff beginning on December 15, bringing the total import tariff to 35 percent:
Harmonized
Tariff Code Product Description & Corresponding ReMA Specification
8107.30.00 ... Unwrought cadmium; waste and scrap.
The U.S. Administration has reacted negatively to this announcement. However, the pledged December implementation date provides some flexibility if the U.S. and Chinese Governments resume negotiations on a trade deal.”
Given the rising trade tensions between the U.S. and China, and the accompanying threats of rising tariff levels on both sides, this seems like a good time to review the pattern of scrap trade flows between the U.S., China, and the rest of the world. For starters, China has consistently been the dominant export market for U.S. scrap since 2003, although prior to the recent period, Canada (1992-2000, and 2002) and Japan (1989-1991) have also been leading scrap export markets:
*Ferrous metals, base metals, precious metals, recovered paper & fiber, plastics, rubber, glass, and textiles.
In dollar terms, Canada reclaimed its status as the largest U.S. export market for scrap during the first half of 2019, with U.S. export sales of scrap to Canada coming in at more than $1.2 billion, or nearly 13% of total U.S. scrap export sales, for the year-to-date, followed by China, India, South Korea, and Mexico.
Looking to Asia (excluding the Middle East and Central Asia), the largest net gain in U.S. export sales so far this year has been to Malaysia, followed by South Korea, Hong Kong, Japan, India, Taiwan, and Bangladesh. Meanwhile, the biggest net losses in Asia so far this year have been to China (-$1.07 billion), Thailand (-$59 million), and Vietnam (-$14 million).
By major scrap commodity, the trend in U.S. exports of plastic scrap to China and other Asian markets have had the worst performance so far this year as sales to Malaysia, Vietnam, and Thailand also remain on a downward trajectory.
For recovered paper exports, markets outside of China have helped to absorb a significant amount of the slack in Chinese demand, although global demand for U.S. recovered paper and fiber continues to vary significantly by grade.
Here’s the trend in year-to-date U.S. exports of recovered paper and fiber by grade and volume to China and the world so far this year, including the sizable increase in demand for pulp derived from recovered paper (up 763% to mainland China and up 310% by volume overall).
As for the metals, nonferrous trade flows to China continue to underperform, especially for copper and copper alloy scrap, but shipments to other markets in the region continue to reshape (and redirect) the movement of base metal scrap throughout the region.
While ferrous scrap exports to China have been negligible in recent years -- helping to insulate ferrous scrap exporters from fluctuations in the Chinese market, key developing market in South, SE, and East Asia including Taiwan, South Korea, India, Vietnam, and Bangladesh are taking on greater significance:
