The global markets for aluminum and copper scrap are entering a period of transition. For the past 20 years, China has been a reliable outlet for excess scrap, establishing a stable trade flow between net-producers of scrap and consumers, but encouraging reduced need for scrap processing infrastructure in the generating markets.
Recent Chinese legislation has placed limits and bans on imports of certain scrap types, upending traditional flows. This spotlight explores how flows are changing and how evolving environmental policies will affect scrap markets in future.
Rapidly rising metal demand in China, coupled with limited restrictions or safeguards on scrap quality or specifications, encouraged Chinese importers to acquire whatever grades of post-consumer and industrial scrap they could – giving rise to China as the prime example of a net scrap consuming market. Furthermore, with wide disparities between processing costs in China and more-developed markets (e.g. North America, Western Europe, Japan and South Korea), the scrapyards and traders in those latter markets were happy to procure and sell scrap to China at highly favorable pricing and shipment terms that they could not arrange with domestic buyers.
This arrangement benefited both scrap exporters in net producing markets and scrap importers in net consuming markets, especially at a time when refined copper prices were skyrocketing due to the limited availability of copper concentrates and regional smelting capacity needed to support China's rapid growth. As a result, an entire global trading industry and business model was formed to transport various grades of nonferrous metal waste from net-producing markets, where domestic players were either unable or unwilling to process the scrap into reusable forms, to net-consuming markets like China, where the regional stakeholders had the infrastructure, technical abilities and commercial willingness to import and consume the world's excess metal scrap.
However, traditional flows have been upended with recent Chinese state action to limit or ban certain imports of metallic scrap. These developments have opened doors for the potential rise of processing markets in the scrap trade, where neither large volumes of metallic scrap are produced or consumed, but rather waste scrap is imported to be processed, sorted and in some cases even smelted or refined into marketable copper and aluminum products prior to re-export into consuming markets. The regulatory framework underlying these developments is changing rapidly, and the ultimate responses from key stakeholders across both net producers and net consumers of scrap will vary widely depending on future developments.
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