BIR World Mirror on Non-Ferrous Metals – Issue October 2022: Mounting challenges include more threats to free trade
A concise summary of the BIR World Mirror on Non-Ferrous Metals – Issue October 2022. Full version with detailed market reports available in the Members Only section of the BIR website.
Until recent months, business conditions for the secondary non-ferrous metals industry had remained generally positive. However, mounting geopolitical tensions and testing macro-economic issues have now conspired to create a far more challenging playing field, according to the latest World Mirror on Non-Ferrous Metals from the BIR world recycling organization.
To make matters even worse, some countries have become more inward-looking and are considering policies that run counter to the spirit of free trade. While the EU continues to debate restrictions on exports of recyclables to non-OECD countries, there have also been discussions in South Africa and Mexico about further controls on exports of some forms of scrap.
In South Africa, where there is already an export tax on scrap metal (10% on both copper and brass and 15% on aluminium), there is talk within the Department of Trade & Industry and the Treasury of a potential ban on scrap exports, although nothing has yet been finalized. And only this month in Mexico, a document outlining measures to try to curb food inflation has included a potential ban on aluminium and steel scrap exports.
Staying in Mexico, and amid the recent disconnect between prices paid at street level and consumer prices, both domestically and internationally, there is evidence of renewed VAT tax distortion involving scrap. It is argued that such distortion rewards those dealers who are willing to take higher fiscal risks instead of those operations committed to efficiency and transparency, thereby hurting the recycling industry and others that depend on recyclable metals in the longer run.
Across into Asia, the Chinese economy is still being challenged by the country’s zero-COVID policy while the weaker Yuan has not helped export volumes in recent months. However, a rebound in the country’s manufacturing PMI above 50 points in September is widely regarded as a positive sign towards economic recovery.
Elsewhere, India’s raw material costs have soared for imported scrap owing to the rupee losing significant ground against the US dollar, while trade momentum in Pakistan has been tempered by devastating floods whose impacts have included disruption of the major highway connecting port and major metal recycling areas. And for Japan, a shortage of domestic copper scrap has pushed exports below 30,000 tonnes per month while stabilizing monthly imports above 10,000 tonnes. While domestic scrap generation remains low, rolling mills are said to be ever more cautious about not overbuying scrap.
Heading westwards to Ukraine, brass semi-finished production and exports remain at approximately 35-40% of pre-conflict volumes. Meanwhile, feedback from Western Europe suggests that truck drivers are still in short supply and that volumes of scrap entering processors’ yards are generally lower.
In the USA, secondary ingot prices have remained relatively buoyant, with high-volume die cast alloy dropping only 5% in the last two months. Secondary aluminium scrap prices have dropped in tandem with the ingot price.