Beijing Permits Fewer Tonnes Under Scrap Import Quotas

China Solid Waste and Chemicals Management, the state conduit regulating the import of waste materials, disclosed the latest list of companies granted quotas for importing ferrous and non-ferrous scrap on November 5, and this time, the tonnage of non-ferrous metal scrap approved for import is much lower than in the previous quota disclosed on October 17, Mysteel Global noted.

In the latest release, six Chinese processing companies and aluminum smelters are permitted to import 13,770 tonnes of aluminum scrap, some 69% less compared with the most recent batch China Waste Management approved last month. During third quarter, the total aluminum scrap import quota amounted to a large 405,416 tonnes but so far in Q4, the import quota for aluminum scrap has only reached 58,705 tonnes.

As for copper scrap import quota, the November 5 release showed that 22 enterprises were approved to import 11,110 tonnes of scrap, being down some 80% from the previous month. The copper scrap import quota totalled 68,475 tonnes since October, which was much lower than the 484,217 tonnes in Q3.

"The high level of import quota in Q3 had exceeded market expectations, but it probably not surprising that the quota this time (from China Waste Management) has largely dropped," a Shanghai-based copper analyst commented. "The decrease in tonnage is certainly in line with the government's guidance in banning foreign garbage imports by end-2020." The target of zero imports would very likely be achieved as scheduled or even achieved earlier than scheduled, he added.

China's central government has been making efforts to restrict "foreign garbage" flowing into the domestic market and has been tightening solid waste material imports since the end-2016, aiming to reduce such shipments to zero by the end of next year, as reported. Beijing's move is aimed at encouraging increased use of domestically sourced scrap and to boost the development of local recycling systems.

"Actually, the content of contamination in imported scrap is much lower than that in domestic scrap sources, and China's restriction on imported scrap is also aimed at encouraging domestic recycling processors to improve their expertise," the analyst added.

An industry source in Southeast China's Jiangxi province agreed that import quota tonnage would remain low in the future, but also he maintained that the declining import quotas for scrap metals would stimulate the import of processed metal products such as copper ingot, aluminum alloy, and steel billet.

"The import quota granted to the companies is based on their capacity. Previously, some enterprises received approval to import and then directly sold out their quota tonnage, but currently, the imports they apply for must be for their own use for production," he said, adding that anyone found trading those imports would never gain an import quota again.

Meanwhile, the metal-price support that might be derived from the reduced import quotas was limited, according to the Shanghai analyst, who pointed out that the copper scrap price still mainly depends on the price trend of copper cathode, for example.

In the latest release from China Waste Management, no import quota for steel scrap was approved, while on the list in the previous month, three companies were allowed to import 510 tonnes of steel scrap in total.

~Inputs from Mysteel Daily