US export recyclables — China shifts, market shudders

Cardboard recycling South Carolina, United States.

Large bundles of compressed cardboard await pickup. Many recycled materials in the United States are exported to China and other countries to be made into other products. Photo credit: Shutterstock.com.

Scrap recyclers are responding to international trade uncertainties and environmental policies enacted by China’s government by seeking new markets for export staples including scrap plastics, metals, and wastepaper.

Waste and scrap commodities are recycled and used as inputs in the manufacturing process. They comprise the largest containerized US export classification, according to PIERS, a sister product of JOC.com. In 2017, global US waste exports of all types declined 0.1 percent to 1.3 million TEU. The five-year compound annual growth rate declined 3 percent.

Conditions have gotten even worse in this year’s first quarter for some commodities, especially plastics, given the reliance of US exporters on the China market. The Institute of Scrap Recycling Industries (ISRI), citing US Census Bureau numbers quoted in metric tons, stated in its May 7 Market Report that total US plastics scrap exports in the first quarter declined 37.6 percent, primarily because of a 92.4 percent plunge in exports to China.

Reduction in China foreign scrap consumption shifts market

ISRI does not foresee an imminent change in fortunes in exports to China, and it urges US exporters of high-quality scrap commodities to immediately pursue other opportunities. “We believe demand for American high-quality scrap remains strong worldwide. There are significant business opportunities for US exporters in other regions of the world worth exploring,” ISRI stated. Those regions include the North American trading partners Canada and Mexico as well as other countries in Northeast and South Asia.

China last year announced environmental restrictions on imports of wastepaper and plastic scrap that affected exports from a number of countries, including the United States. Those actions continued the “Green Fence” policies of recent years aimed at preventing imports of waste products that the Chinese consider to be adulterated. In a chilling warning to exporters of all scrap products, China signaled its long-term intention to work toward 100 percent sourcing of waste materials for manufacturing inputs.

Although the Trump administration this year announced tariffs on imports from some countries, including China, and retaliation is recurring, imports of US scrap have not been targeted specifically. Nevertheless, China has increased its inspections of shipments from the United States, and this week it announced a one-month suspension of the China Certification and Inspection Group inspections, which will lead to delays in processing imports. ISRI responded in its newsletter, “Exporters may wish to consider diverting cargoes already on the water to other countries.”

In the long term, China is expected to remain an important market for US scrap exporters. Also, the infrastructure in some nations in Southeast Asia and the Indian subcontinent must be further developed, and shipping services from North America must be expanded to handle growing cargo volumes, so a wholesale shift to other markets is not feasible.

Nevertheless, China has indicated clearly that it intends to shift toward a value-added, technology-based economy that will rely less on scrap imports, so US exporters must revise their business plans and respond to opportunities that are developing in other markets, said Adina Renee Adler, ISRI’s senior director of international relations.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter:@billmongelluzzo.

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