Impact of COVID-19 on Ferrous Scrap Industry - Update

In a recent update published by BIR, a summary of the impact of the COVID-19 pandemic on the industries of various regions around the world is provided, with special focus on the scrap recycling. Below are key takeaways from it:

China - The country has lifted almost all of its lockdown restrictions but factories do not have enough orders to operate at full capacity, as well as insufficient markets to supply.

Buyers have become increasingly selective about the quality of scrap they purchase.

Demand problems will probably persist, with countries averse to buying from China not only because of virus fears but also as part of a bid to reduce their dependence on others - something which could dramatically change the Chinese business landscape in the years to come.

India - Port congestion and labour shortage remain two of the largest issues being faced.

Trade associations are continuing to liaise with the government over ongoing port congestion, notably on having detentions lifted so as to reduce the impact on international trade. However, some port operators are not cooperating with government orders to grant waivers for ground rent.

Overall, India's lockdown measures are slowly being eased, although those factories that have reopened are operating at only 30-40% of production capacity and are also facing problems with payment delays and labour being unable to return to work. Indian industry is nevertheless still expected to become fully operational in the next few weeks.

USA - Recyclers are continuing to report supply-side challenges in the face of strong demand.

The Environmental Protection Agency is helping to urge the public to continue recycling, especially paper. Meanwhile, industry is concerned with liability exposure in the workplace and insurance coverage leaving out exceptional circumstances. The issue has been raised in Congress but nothing is expected to happen before June.

There are no reports from the USA of problems with exports or export controls. Supply and demand are in reasonable balance, but at low levels.

Europe - A gradual economic reopening is taking place in many European countries.

Germany - The industry is restarting production to varying degrees and borders were reopened to the rest of the EU on May 15, thus alleviating logistics problems.

UK - Business lockdown restrictions have been eased for many here. Some yards are only delivering or only collecting, and while sales are a problem, business is slowly improving. New car registrations in the UK plummeted 97% in April, thus highlighting the severe pressure that the pandemic is applying to the secondary metals industry.

In anticipation of a second wave of the virus, some mills have been overstocking.

Netherlands - Recycling has been considered an essential industry throughout the crisis. Initially, many employees took a significant amount of sickness leave but businesses are now running almost at normal capacities.

Russia - Half of the regions here still have restrictions in place on scrap collections, leading to a sharp fall in volumes; these were 50% lower in April than in the same month last year and the same is expected for May. Overall demand for scrap metals has fallen 30%. As Russia's metallurgical and recycling industries are export-orientated, they have been heavily affected by the pandemic.

UAE - Their decision to suspend ferrous scrap and recovered paper exports for four months, is of specific concern to Russia too. Although this measure is aimed at strengthening the UAE's domestic demand, the Bureau of Middle East Recycling has warned that local industry will be unable to handle all available scrap and thus exports will need to resume shortly.

Meanwhile, an improvement was witnessed in UAE exports to India, but some customers unwilling to pay up while containers are still detained in ports while others have no liquidity.

The UAE economy is expected to reopen fully once Ramadan ends on May 23, at which point Saudi Arabia is anticipating an increase in its currently very low scrap export volumes.

Saudi Arabia - It has been decided to increase VAT from 5% to 15% in July to help compensate for low oil prices.

Brazil - The country is worried about the UAE's export restrictions and could retaliate. Meanwhile, industry closures in response to the Coronavirus have led to a 65% drop in scrap generation within Brazil.

South Africa - Across the country there are reports of inconsistency in enforcing restrictions: for example, a dealer in Durban operating two yards 10 kilometres apart has been told by police that one can operate whereas access to the other is restricted. Volumes reaching scrap yards are very low despite the existence of demand.

With an easing of lockdown measures expected in South Africa at the end of May, some suppliers are pushing to move to shorter-term contracts to mitigate potential risks. Meanwhile, exporters are facing problems in obtaining export permits for ferrous and non-ferrous scrap.