As China goes, so goes the U.S. export trade in wastepaper and scrap metal. Unfortunately for shippers of these two key commodities, the news from China wasn’t very good in 2012.
China’s GDP grew 7.4 percent in the third quarter of 2012, an enviable number for any nation, but the lowest growth in three years for the world’s second-largest economy and down from 9.3 percent for all of 2011.
China’s GDP reflected the weak growth in the U.S. and recession in Europe. Because those regions are two of China’s largest export markets, weak merchandise imports in the U.S. and Europe translate to declining manufacturing in China. It also means China’s factories require less scrap for production of merchandise exports.
China imports wastepaper to produce cardboard boxes, and Chinese manufacturers import scrap metal to produce equipment, automotive parts and other metal products.
The U.S. is one of the world’s largest exporters of scrap products. Wastepaper shippers regularly account for five of the top 12 exporters of containerized goods and more than 20 of the top 100 U.S. exporters on The Journal of Commerce’s ranking of Top 100 Exporters. Scrap metal shippers account for five of the top 100 exporters.
More than 70 percent of U.S. exports of these commodities go to China and other Asian countries, so shipping lines in the westbound trans-Pacific rely heavily on scrap commodities to fill their ships.
According to PIERS, U.S. containerized exports of scrap metal in the first half of 2012 declined 14 percent compared to the first two quarters of 2011. Shippers of paper, paperboard and other wastepaper fared better. Exports increased 7 percent in the first two quarters of 2012 compared to the same period in 2011.
With GDP growth expected to be modest in the U.S. in 2013 and sluggish, at best, in Europe, China’s factories aren’t expected to increase their production significantly. That means U.S. exporters of scrap products are poised for another disappointing year.
Trans-Pacific shipping conditions, however, are favorable for U.S. exporters of scrap paper and metals. Facing excess capacity westbound, carriers priced their services aggressively last year, said Nick Halper, director of export at the Paper Tigers.
Carriers have yet to announce their vessel deployment plans for 2013, but based on projections for the delivery of new ships, carriers likely will increase the size of the global container fleet by at least 7 percent. The Asia-Europe trade has struggled with overcapacity for two years, so some of that capacity likely will find its way into the Pacific. That will keep a lid on freight rates in the westbound Pacific in 2013.
Scrap exporters had access to a sufficient supply of empty containers in 2012, a condition expected to continue this year. Equipment isn’t usually a major issue for scrap exporters. Unlike their counterparts in agriculture, scrap shippers are located in cities. Large inland and coastal cities are destinations for imports of consumer items, and those containers are available to scrap shippers when the boxes are unloaded.