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Plastic scrap market hardest hit by China’s actions

(Washington, DC) – News that China would ban certain scrap imports shook the recycling industry last summer, yet U.S. global scrap exports increased overall in 2017 according to a new analysis from the Institute of Scrap Recycling Industries (ISRI). As improved demand for ferrous and nonferrous metal scrap more than offset weaker demand for non-metallic scrap, total U.S. scrap exports advanced in 2017 in both value and volume terms.

“Despite adversity in 2017, the recycling industry proved to be very resilient as it has shown to be so many times in the past,” said ReMA Chief Economist Joe Pickard. “Scrap is a valuable commodity used as feedstock in the manufacturing process in countries around the world. Its constant demand demonstrates the longstanding value and need in the global marketplace. However, while overall exports fared better in 2017 and provide some ground for optimism, one need look no further than the plastics data to see the potential impacts of China’s import ban on other scrap commodities.”

According to recently released Census Bureau data, U.S. exports of all scrap commodities rose to 37.9 million tons valued at $17.9 billion last year, an 8.6% increase in dollar terms. China once again played an important role in U.S. scrap exports. An estimated 31% of U.S. exports, valued at more than $5.6 billion were destined for mainland China in 2017.

“China’s ban and change in regulations will continue to redirect global scrap flows,” Pickard stated. “The implementation of reduced ‘carried waste’ thresholds starting March 1 remains squarely in focus for scrap recyclers despite numerous unanswered questions. Among those questions are: what exactly constitutes carried waste; whether one percent for nonferrous scrap and 0.5% threshold for all other scrap materials can be effectively (and consistently) implemented; and whether import license cuts will be geared mainly toward mixed metal shipments or for all nonferrous scrap commodities. Furthermore, the difference between scrap and waste remains a critical distinction in policy discussions moving forward.”  

Commodity by Commodity Analysis:

Nonferrous: Although U.S. copper and copper alloy scrap exports to mainland China did trail off in the 4^th quarter of 2017 (down 10 percent year-on-year), for 2017 as a whole shipments to China increased nearly 4 percent. Overseas demand also improved in Hong Kong, Korea, Japan, Malaysia, Canada, and Mexico last year, helping to boost U.S. copper scrap exports 6.2% in 2017 and above the 1 million ton mark for the first time since 2014 according to the latest Census Bureau trade data.

Unlike the slowdown in 4^th quarter copper scrap exports to mainland China, U.S. exports of aluminum scrap to China surged 32 percent higher year-on-year (as compared to the 4^th quarter of 2016) to more than 230,000 metric tons during Oct-Dec 2017. As a result, aluminum scrap shipments to China jumped 18.5% higher for 2017 overall, helping to lift total U.S. aluminum scrap exports (including UBC’s and RSI) 15.8% higher to nearly 1.57 million metric tons. Other growth markets for aluminum scrap last year included Korea, Mexico, India, Hong Kong, Indonesia, and Germany according to the Census data.

Ferrous: U.S. ferrous scrap exports (excluding stainless steel and alloy steel scrap) had their best annual performance since 2014, climbing 23% higher year-on-year by volume to 13.8 million metric tons valued at over $4.1 billion in 2017. Improved demand from Turkey (+16%), Vietnam (+93%), China (+60%), Pakistan (+65%), Bangladesh (+111%), Mexico (+12%), and others contributed to last year’s gains.

Recovered Paper and Fiber: Following China’s notification to the World Trade Organization in July that mixed/unsorted RP imports into the country would be banned, recovered paper export prices (and mixed paper prices in particular) were pressured sharply lower. That reversed significant price gains earlier in the year. As a result, while the total volume of U.S. recovered paper exports dropped from 19.8 million metric tons in 2016 to just over 18.3 million metric tons in 2017, the price strength in the first half of the year carried the dollar value of U.S. recovered paper and fiber exports 1.4% higher to more than $3.2 billion in 2017 thanks in part to stronger sales to India, Mexico, Canada, Indonesia, and Vietnam:

Plastic Scrap:  U.S. plastic scrap exports were hit hardest by the Chinese import restrictions announced last year. Plastic scrap export sales to mainland China and Hong Kong dropped 32% and 38%, respectively, in dollar terms in 2017. As Chinese plastic scrap purchases plummeted, the total volume of U.S. plastic scrap exports fell 14 percent to 1.67 million metric tons, the lowest level since 2008. The drop-off in Chinese import demand for plastic scrap was especially dramatic late in the year, despite the regulations not yet coming into effect.

Additional data along with commodity-specific charts and tables are available on the ISRI website.

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The Institute of Scrap Recycling Industries, Inc. (ISRI) is the "Voice of the Recycling Industry™." ReMA represents more than 1,100 companies in 21 chapters in the U.S. and 35 countries that process, broker, and consume scrap commodities, including metals, paper, plastics, glass, rubber, electronics, and textiles. With headquarters in Washington, DC, the Institute provides education, advocacy, safety and compliance training, and promotes public awareness of the vital role recycling plays in the U.S. economy, global trade, the environment and sustainable development. Generating nearly $117 billion annually in U.S. economic activity, the scrap recycling industry provides nearly half a million Americans with good jobs.