May/June 1996
How did the U.S. scrap export market fare last year? Which countries were the biggest buyers—and why? These questions and others are answered in this five-year retrospective of export figures for eight scrap commodities.
U.S. scrap exporters had little to complain about in 1995, as virtually all scrap commodities posted double-digit increases in their export totals, with some reaching record levels.
The biggest driving force behind this growth was the economic strength recorded in many countries throughout the world, which generally increased demand from foreign consumers. Many leading importers of U.S. scrap in 1995, were, in fact, “developing” countries—such as China and India—with burgeoning economies and, hence, a significant rising need for raw materials to manufacture semifinished and finished products.
Also, given the weak state of the U.S. dollar last year compared with many other currencies, it was often more economical for foreign consumers to buy and ship scrap from the United States than from scrap-rich regions such as Europe.
Another factor contributing to 1995’s export surge was the U.S. economy’s sluggish overall performance last year. Though the economy showed strength in the first half of 1995, it fizzled in the second, with the gross domestic product registering a meager 2-percent increase over 1994—its weakest showing since 1991. In the face of such tepid domestic demand, recyclers turned to the export market to fill the void.
And for each of the major scrap commodities, there are more-specific explanations of the trends.
Aluminum. Asian consumers were certainly the dominant importers of U.S. aluminum scrap in 1995, claiming five of the top six spots. Thanks in large part to their demand, aluminum scrap exports rose 40 percent last year compared with 1994, continuing the pace of 1994’s 45-percent gain over 1993.
As in most previous years, Japan was far and away the single largest consumer of U.S. aluminum scrap in 1995, buying 28 percent more than in 1994, suggesting that its weakened economy is continuing to regain strength. Even so, Japan’s consumption is down considerably from its highs of the mid-to-late 1980s, when its primary aluminum industry declined and its aluminum manufacturers became more scrap-dependent. While Japan’s economy has bounced back from its bust of a few years ago, growth in the next few years will likely be modest because its manufacturing base has “matured,” says an industry source.
The big story in aluminum scrap exports is the voracious appetite Japan’s neighbors have developed in the past few years. Take China and Hong Kong, which imported 158 and 295 percent more aluminum scrap, respectively, in 1995 than in the previous year. Even more impressive, Hong Kong has upped its aluminum imports almost 2,000 percent since 1991. (It should be noted that Hong Kong itself is not a large-scale scrap consumer. Instead, it transships most of the scrap it imports to China and other Asian consumers. For more on Hong Kong, see “Hong Kong in Transition,” beginning on page 48.)
With growth like that, China—with Hong Kong’s help—could surpass Japan’s aluminum scrap imports in a matter of years, U.S. exporters say.
Copper. Of all scrap commodities last year, the copper and brass scrap sector posted the largest one-year increase in exports, improving 52 percent over 1994, with Canada importing the lion’s share—29 percent—of the total. Canada’s close proximity to the United States and its large copper smelting base explain its prevalence in the market, notes a U.S. exporter.
As with aluminum, Asian consumers figured prominently in the copper and brass scrap niche last year, with China and Hong Kong buying 40 and 223 percent more copper and brass scrap, respectively, than in 1994. Korea and Japan—the top two copper importers in 1991—also posted considerable gains of 70 and 21 percent last year, though their overall consumption was lower compared with the late 1980s and early 1990s.
Iron and Steel. When it comes to U.S. iron and steel scrap exports, Korea was king of the consuming heap last year, single-handedly accounting for 34 percent of export demand and far outstripping Turkey and Canada, the second- and third-place consumers. Spurred in part by Korea’s 27-percent increase in demand, total U.S. iron and steel scrap exports grew 17 percent in 1995.
According to one exporter, Korea was such an aggressive buyer because “just about every steel mill there has doubled its capacity over the last few years.” Also, though Korea is considered a developed country, its economy maintains the rapid growth of a developing country, surging around 9 percent a year.
Korea is expected to become even hungrier for ferrous and other scrap in the near term, one exporter notes. Malaysia and India are other countries to watch on the ferrous scrap scene, he adds, explaining that their steel mills are bigger than ever before and both countries have “hung their hopes for the future on the steel industry.”
Nickel, Stainless Steel, and Alloys. Many countries—developed and developing—appear to be banking on a bright future for the stainless steel market, and this optimism is reflected in the steadily increasing export demand for nickel, stainless steel, and alloy scrap, which expanded 36 percent in 1995 and has swelled 111 percent since 1992. This stepped-up pace has been largely due to the breakneck growth of stainless steel manufacturing capacity around the world, says a market analyst, who explains that increased stainless production is a sign that a society is moving toward being more consumer-oriented.
Canada has been the largest consumer of U.S. nickel, stainless, and alloy scrap for the past four years, boosting its demand 12 percent in 1995 and 145 percent since 1992.
Most interesting, however, is Mexico’s emergence as the second-largest consumer of U.S. nickel and stainless scrap in 1995, boosting its demand 378 percent over its 1994 total and 800 percent since 1991. This is especially notable given the depressed state of Mexico’s economy in the past few years, which was frequently cited as a reason why its imports of other scrap commodities were down or showed slow growth in 1995. One explanation for its craving for nickel and stainless scrap was that some Mexican mills had already made investments in stainless production prior to the economic collapse and that Mexico has become an important manufacturer of finished stainless products, the bulk of which are exported.
Lead. Compared with other scrap materials, lead presented a curious export scenario in 1995. On the positive side, overall exports increased 18 percent, with Canada—the single largest importer—ratcheting up its demand 40 percent. On the negative side, all other leading importers—with the exception of Venezuela and Taiwan—decreased their purchases, with Brazil providing the most dramatic example, cutting its imports from 4,110 mt in 1994 to zero last year.
With nearly every country in the world restricting lead trade—in part due to Basel Convention stipulations—it is no mystery why many countries have steadily cut their imports of lead scrap.
Zinc. Zinc, lead’s geological compatriot, was the only scrap commodity to show a decline in exports last year, decreasing 4 percent. One contributing factor for this was that Taiwan—which accounted for 69 percent of demand in 1995—tightened its import restrictions, which made it easier for that country’s consumers to buy slab zinc from Japan and Korea rather than U.S. zinc scrap.
India, the second largest importer of U.S. zinc scrap in 1995, also consumed less last year than in 1994, cutting its purchases 27 percent. The remaining of the top five buyers—Portugal, Canada, and Hong Kong—helped make up for some of Taiwan and India’s shortfall, boosting their consumption substantially by 40, 112, and 510 percent, respectively.
Paper. Scrap paper exports reached a record 10.4 million tons in 1995, up 35 percent from 1994. Paper experts attribute this strong export demand, in part, to technological advances in paper making that allow mills to use ever-increasing amounts of recycled fiber in their products. Also, they note, much of the world is fiber-poor, making the fiber-rich United States a logical source of secondary fiber.
By country, Canada, Mexico, and Korea were the top three scrap paper consumers in 1995, collectively accounting for 55 percent of all exports and showing respective growth of 49, 50, and 24 percent. These three lead the pack largely because they have well-developed paper making industries, with Canada and Mexico enjoying the added benefit of having easy and economical access to U.S. supplies. (For more on the Mexican scrap paper market, see “Mexico’s Paper Promise,” beginning on page 105.)
Plastics. Scrap plastics also set an export record last year, increasing 26 percent compared with 1994 and 100 percent since 1993. These export gains reflected the unprecedented rise in demand and prices for scrap plastics, both in the United States and abroad, in 1994 and the first half of 1995.
As in previous years, Hong Kong and Canada were the top two consumers of U.S. plastic scrap, claiming 76 percent of total exports. Hong Kong was one of several Asian countries—including China, Taiwan, and India—that imported more U.S. plastic scrap in 1995. Much of the material consumed in Asia was used as feedstock in the production of synthetic fiber to compensate for meager Asian cotton crops in recent years, which had put a pinch on their textile industries. (For more on this facet of the market, see “Plastics: The Scrap Market Comes Back to Reality” in the January/February 1996 issue.)
—Kent Kiser and Eileen Zagone
How did the U.S. scrap export market fare last year? Which countries were the biggest buyers—and why? These questions and others are answered in this five-year retrospective of export figures for eight scrap commodities.