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Whether or not Green Fence or other signals could have foreseen what is taking place to reshape the Chinese market could have prepared the industry to innovate and adapt, the reality is you have been given very little notice and very little time to transition. And the punches keep coming as part of what many worried was a brewing trade war between the United States and China. All that said, one thing is for sure – China’s market has changed for good.

Why this matters: China has a history of overreaching in their rulemaking without fully understanding the implications and then back-tracking toward a policy that makes more sense for their industry (and saves face). But not this time. There are a number of rumors that China’s consumers of scrap commodities are unhappy about the inaccessibility of the high quality scrap commodities they had come to depend on from the United States and may influence the government to relax a rule here and a policy there. But the whole “regime” of import restrictions – ban, quality standards, import quotas – is here to stay.

There’s more? On top of all this, scrap trade between the United States and China was caught in the middle. In retaliation for the Trump Administration’s “Section 232” - national security-based – based tariffs on steel and aluminum imports, China imposed a 25 percent import duty on aluminum scrap from the United States. The Chinese government then suspended CCIC’s U.S. operations from doing pre-shipment inspections on scrap. Allowing the Canadian operations to handle the work may have been a glimmer of hope, but the lost market share may be gone forever.

But, but, but…The Chinese government has pledged to buy more “stuff” from the United States.  Those discussions are ongoing, and maybe we’ll get a signal that the “new normal” of scrap trade can resume. But the only way China can fulfill that commitment to the Trump Administration is take on reforms to its own import regulatory regime. While this could mean a resumption of CCIC’s operations that were already intended, the ban, stringent quality standards, and import quotas are here to stay.

Innovate and adapt. Recyclers are already taking a number of measures to adapt to China’s new market with improvements to the recycling infrastructure. It is key to know that China still wants the commodities— but they want them to be manufacture-ready. No longer is China a destination to recycle materials from abroad. Some companies are innovating to stay ahead of the demand curve and find customers elsewhere. Demand is strong in Southeast Asia, India, Europe, and Latin America. But the more recyclers can do to extract value from the recycling streams, the better to be able to weather the storm of today’s scrap markets.

SPAN Main