NOVEMBER/DECEMBER 2007
Export shipments of U.S. scrap metal have hit record levels recently, but analysts wonder how long this pace will continue.
BY ANN C. LOGUE
The story of U.S. scrap metal exports over the past five years seems to be the story of China. In 2006, nearly one out of every three metric tons of scrap metal exported in the six major commodity categories went to China (including Hong Kong). It was the number-one destination of U.S. copper, aluminum, zinc, and stainless steel and nickel alloy scrap; the number-two destination of ferrous scrap; and the fourth-largest purchaser of lead scrap. In some cases, its purchasing volume is several times larger than the next biggest importer. As recently as 2002, for example, China and India bought roughly the same quantity of zinc scrap from the United States. Five years later, in 2006, China purchased 10 times more than India. “The least expensive material China can buy is scrap,” says Bob Garino, ISRI’s director of commodities.
But China isn’t the only game in town. In fact, even though the country’s scrap metal imports from the United States grew 2 percent from 2005 to 2006, its share of the U.S. export market decreased from 34 percent to 30 percent. Looking back over five years, U.S. scrap metal exports have grown 69 percent since 2002, but China’s share has actually decreased 2 percent. In other words, the scrap metal export pie has grown much bigger, but China’s piece has remained nearly the same. Countries such as Canada, Mexico, Taiwan, India, Tur-key, and South Korea also are purchasing an increasing volume of scrap, helped along by the falling U.S. dollar, a growing world economy, and industrialization in developing countries.
As economists are fond of saying, past performance is no indicator of future returns. Potential growth in U.S. scrap consumption, China’s post-Olympics behavior, the dollar’s strength, and other factors could affect exports over the next few years. The best we can do is take a look at the recent past as a potential sign of what’s to come. The U.S. International Trade Commission collects data on exports in 250 different industries, including scrap. Though the numbers aren’t perfect—imagine the difficulties of tracking so much material year in and year out—they can indicate how export markets have changed and where they are headed.
Overall, according to the U.S. ITC Dataweb, the markets for the six major scrap metal exports (ferrous, copper, lead, zinc, aluminum, and nickel and stainless alloys) enjoyed good growth from 2005 to 2006, increasing 17 percent to a total of 17.5 million mt. (All export figures in this article include reexports, and all figures are rounded.) Three particularly hot commodities were lead, zinc, and nickel/stainless, where exports were up 70 percent or more over that period. Here’s a look at U.S. export trends for each of those six commodity categories. (For scrap paper export trends, read “High Tide for Scrap Paper Exports” in the May/
June 2006 issue of Scrap.)
Ferrous
In 2006, the United States exported 11.2 million mt of ferrous scrap, 3 percent more than in 2005 and 40 percent more than in 2002. Turkey has been the main driver of those five years of steady growth. Its large electric-arc furnace steel mills need a steady supply of ferrous material, much of it from the United States. In 2002, Turkey imported only 374,000 mt of U.S. ferrous scrap; by 2006,
it needed more than six times that amount—almost 2.5 million mt, or 22 percent of the U.S. export market—to keep its increasing number of mills in operation. During the 2002 to 2006 period, the volume of U.S. ferrous scrap exports increased from 8 million to 11.2 million mt, so Turkey is taking a bigger piece of a bigger pie. With at least one new mill opening up this year, Turkish demand should remain steady.
Notably, Turkey surpassed China to become the top importer of U.S. ferrous scrap in 2006. China had held the top slot since 2001, but its ferrous imports fell from 2.9 million mt in 2005 to 2 million mt in 2006. Ferrous exports to Mexico and Canada, the third- and fourth-largest buyers, were down in 2006 compared with the previous two years. Mexican buyers took in 1.1 million mt in 2006, down from 1.5 million mt in 2005. The decline was less, but still noticeable, in Canada, which purchased 1 million mt in 2006 and 1.2 million in 2005.
Rounding out the top five ferrous scrap markets, Malaysia bought more than 8 percent of U.S. ferrous in 2006, 904,000 mt, up from 311,000 mt in 2002 and 454,000 in 2005. Two countries to watch are Vietnam, which increased its ferrous purchasing from 20,000 mt in 2005 to 456,000 mt in 2006, and Egypt, which grew from 208,000 mt to 392,000 mt in that period. Both countries had negligible ferrous purchases five years earlier.
Also of note, the U.S. ferrous scrap export market has become less concentrated in the past five years: The top-three buyers in 2002 purchased 70 percent of the exported tonnage that year, whereas in 2006 the top three only took in about 50 percent of the market.
Aluminum
U.S. companies exported 1.5 million mt of aluminum scrap in 2006, 33 percent more than the 1.1 million mt shipped in 2005 and more than double the 2002 total of about 620,000 mt. Importers all over the globe have been willing to absorb that supply, starting with China, which purchased about 921,000 mt in 2006, or 62 percent of the market. This is up more than 50 percent from 2005, when China bought 608,000 mt of aluminum, and more than four times the 216,000 mt it imported in 2002.
China’s dominance of the U.S. aluminum export market has grown steadily for a decade, surpassing Canada in 2002 for the top spot. In 2002 China garnered about one-third of the U.S. aluminum scrap export market; in 2006 it took in about twice that amount.
South Korea’s aluminum scrap purchases also have grown steadily over the past five years to make it the second-most-popular destination for U.S. exporters of aluminum scrap, growing from 44,000 mt in 2002 to more than three times that amount, 153,000 mt, in 2006.
In contrast, Canadian mills, though still major buyers, have been taking in less U.S. aluminum scrap over that time period. They purchased 149,000 mt in 2006, down from 206,000 mt in 2002. Mexican purchasing has varied over the five-year period, from 85,000 mt in 2002 to a low of 38,000 in 2004, then back up to 99,000 in 2006.
Taiwan, the fifth-largest export market, is showing steady growth in its purchasing, buying 56,000 mt in 2006, up more than 8 percent from 2005 and more than double 2002 levels. Those five countries purchased 93 percent of U.S. aluminum scrap exports in 2006, about the same level of concentration as in 2002.
Copper
Just a few years ago, ReMA members defeated an effort to limit the export of U.S. copper scrap. Since then, copper exports have grown, but not nearly as quickly as some other scrap metal exports.
The United States exported 847,000 mt of copper scrap in 2006, an increase of almost 18 percent over 2005 and nearly 50 percent more than in 2002. China is far and away the leading destination for American copper scrap exports, taking in more than five times that of the number-two importer, Canada, and 63 percent more than it did in 2002. Its hold on the market weakened last year, however: China took in nearly three-quarters of U.S. copper scrap exports in 2005, but only two-thirds of the market in 2006.
Some of the scrap that previously went to China most likely headed north instead: During the same period, exports to Canada more than doubled, from 6 percent of total exports in 2005 to 13 percent in 2006. China and Canada combined account for 80 percent of the U.S. copper scrap export market—a 20-percent greater share than 2002’s top two importers, China and India, had.
Of the three other countries on copper’s top five, two—South Korea and Germany—purchased fluctuating amounts of copper over the five-year period, but their intake in 2006 was nearly the same as what they purchased in 2002: 34,000 mt for South Korea and 31,000 mt for Germany. The up-and-comer behind Canada, however, is Taiwan, which grew from importing 19,000 mt in 2002 to 32,000 mt in 2006, a 67-percent increase over the five-year period and a 45-percent increase from the 22,000 mt the country acquired in 2005.
Lead
U.S. lead scrap exports increased nearly 80 percent from 2005 to 2006, to 121,000 mt. The lead scrap export market has fluctuated over the past five years, ultimately rising 14 percent from 2002 to 2006.
Canada and South Korea are the largest destinations for U.S. lead scrap, together taking in almost 90 percent of exports in 2006. Canada’s lead imports from the United States nearly doubled in the five-year period, from 41,000 mt in 2002 to 82,000 in 2006, making the country the largest buyer of U.S. lead scrap, with 67 percent of the market. South Korea, a distant second, also has experienced significant growth in U.S. lead scrap imports, from 6,000 mt in 2002 to 26,000 mt in 2006. In the past year it has nearly quadrupled its purchases and more than doubled its market share, from 10 percent of U.S. lead scrap exports to 21 percent.
In contrast, China’s intake of U.S. lead scrap fell dramatically over the five-year period. In 2002, China purchased 54,000 mt of lead, half of U.S. exports that year. By 2006, China was buying only 3,000 mt of lead scrap from the United States—still enough to rank fourth, but 95 percent less than it was buying five years earlier. Its purchases are trending upward, however, since its 10-year low of 220 mt in 2004.
Rounding out the top five are India and Belgium, both of which have increased their purchases over the past five years, albeit from low levels. India imported 1,000 mt of U.S. lead scrap in 2002 and 7,000 mt in 2006, while Belgium went from no U.S. lead scrap imports in 2001 to 187 mt in 2002 and 957 mt in 2006. Fully 98 percent of U.S. lead scrap exports went to those five countries in 2006, a concentration that has not changed since 2002.
Zinc
The U.S. zinc scrap export market rose sharply from 2005 to 2006, from about 47,000 mt to 84,000 mt. In the five-year period from 2002 to 2006, U.S. zinc scrap exports have increased fourfold, rising from 2002’s 10-year low of 19,800 mt. China imports a dominant and growing share of zinc scrap from the United States, buying 72,000 mt—86 percent—of the metal exported in 2006, up from 80 percent in 2005.
During the same period, exports to India dropped by 6 percentage points, from 13 percent of total exports in 2005 to 7 percent in 2006. Looked at another way, exports to India remained more or less constant from 2005 to 2006, at 6,000 mt, while total exports and exports to China nearly doubled. China’s purchases of U.S. zinc scrap have grown consistently since 1999, whereas India’s purchases have decreased steadily since 2002.
Together, China and India claim the lion’s share—93 percent—of U.S. zinc scrap exports. Also in the top five, the Malaysian market has shown the most growth, following negligible purchases in 2002, 2003, and 2004 with 251 mt in 2005 and 1,000 mt (2 percent of exports) in 2006. Canada also increased its U.S. zinc scrap intake significantly recently. In 2006, Canada purchased 1,000 mt, nearly six times more than the 187 mt it acquired in 2005 and more than triple the 319 mt it imported in 2002. Meanwhile, Taiwanese buyers purchased 2,000 mt in 2006, up 21 percent from 2005 and down 1 percent from 2002.
Nickel, Stainless Steel, and Related Alloys
Exports of nickel, stainless steel, and related alloys (NSSA) from the United States grew 71 percent from 2005 to 2006, going from 2.2 million to 3.8 million mt. Those exports more than tripled over the five-year period from 2002 to 2006.
China became the top recipient of U.S. nickel and stainless scrap in 2006, surpassing Canada by taking in 1.5 million mt. China now purchases 41 percent of U.S. NSSA exports, up from 30 percent five years ago.
Canada’s NSSA purchases have fallen since a 10-year peak of 1 million mt in 2004. Canadian imports from the United States dropped nearly 50 percent, from 959,000 to 505,000 mt, from 2005 to 2006. In contrast, South Korean purchases have risen steadily for the past three years to make the country the second-largest buyer of U.S. nickel and stainless. The 924,000 the country bought in 2006 is seven and a half times more than it purchased in 2005.
Bangladesh is a notable new entrant in the nickel and stainless scrap market. It went from negligible purchases in the 2002 to 2004 period to buying 27,000 mt in 2005 and 202,000 mt in 2006, or 5 percent of all U.S. NSSA scrap exports.
Also in the top five, Taiwan increased its NSSA scrap purchases from the United States from 81,000 mt in 2005 to 133,000 mt in 2006.
It’s important to note, however, that industry sources take strong exception to the tonnages reported by Bangla-desh and other Southeast Asian nations, and they have asked the trade commission for clarification. The top-five countries purchased 88 percent of U.S. nickel and stainless scrap exports in 2006.
Ann C. Logue is a writer based in Chicago.