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July 6, 2020

  • Weekly Market Report

Commodity News

Ferrous Last week’s trade developments have important implications for the domestic iron and steel market, including the U.S-China phase-one trade deal signed on January 15 that includes Chinese commitments to buy U.S. manufactured goods, including iron and steel products.

According to the USTR press release, “China’s imports of U.S. manufactured goods, such as industrial machinery, electrical equipment, pharmaceutical products, aircraft, vehicles, optical and medical instruments, iron and steel, solar-grade polysilicon, hardwood lumber, and chemical products, among other goods, will total at least $120.0 billion in 2020 and at least $131.9 billion in 2021.”

Ahead of the Lunar New Year holidays, Macquarie reports “Our latest China survey shows no big change in sentiment on steel while iron ore traders have turned more positive on the post-holiday market. Steel mills have restocked iron ore but expressed an appetite in buying more after being neutral last survey, partly because they worry prices may rise further in Q2 due to a relatively constrained supply picture. A similar restocking trend is also seen for coking coal/coke.

{Chinese} steel mills’ orders continue to beat normal seasonality helped in part by a milder winter and stronger demand from the infrastructure sector. Mills’ capacity utilization improved further, while plant’s steel inventory dropped slightly, partly due to a transfer of steel stocks to traders.”

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Here in the U.S., Fastmarkets AMM reports that hot-rolled coil prices have peaked as expectations for the February scrap market remain muted: “Hot-rolled coil prices in the United States might have peaked on high output and market predictions that ferrous scrap prices might weaken in February, some sources warned. Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $29.69 per hundredweight ($593.80 per short ton) on Tuesday January 21, down by 0.8% from $29.94 per cwt on Friday January 17 and down by 2.7% from $30.52 per cwt a week earlier on January 14. The index was not calculated on Monday January 20 due to the national Martin Luther King Jr holiday. Inputs were received in a wide range from approximately $27.50-32.50 per cwt.”

As for U.S. steel production, the American Iron and Steel Institute reports for the week ending Jan 18, “domestic raw steel production was 1,928,000 net tons while the capability utilization rate was 82.7 percent. Production was 1,871,000 net tons in the week ending January 18, 2019 while the capability utilization then was 80.4 percent. The current week production represents a 3.0 percent increase from the same period in the previous year. Production for the week ending January 18, 2020 is up 0.3 percent from the previous week ending January 11, 2020 when production was 1,923,000 net tons and the rate of capability utilization was 82.5 percent.”

Nonferrous As per ISRI’s Member Alert, “The Chinese Government has announced the intent to implement a new standards regime for imports of copper, brass, and aluminum derived from recycling, and the new standards were posted over the weekend. Although the system does not completely reopen the Chinese market to scrap trade, it is a major indication that the Chinese Government finally acknowledges that scrap commodities are valuable products and imports, and should not be managed under the same guidelines for "solid waste." This is a major achievement after two decades of ISRI advocating that Scrap is Not Waste.

Our partners at the China Nonferrous Metals Association Recycling Branch (CMRA) published charts indicating the required metal recovery content and contamination limits, but we are told that more detailed rules to accompany these standards will soon be published by the Standardization Administration of China.  As we await the detailed regulation, we are making available the charts provided by CMRA as well as charts published in Fastmarkets on January 20.

The required metal content and limitations on contamination are not set at one level for all grades, another indication that the Chinese Government acknowledges that a one-sized-fits-all approach is not in line with market conditions. It is our understanding that Zorba will be categorized as "aluminum pieces" under the new standards.

We have not yet heard if the Chinese Government will impose import quotas on materials that meet these new standards. However, we do know that materials originating from the United States will continue to be levied 25 percent import tariffs under the U.S.-China trade war. Nevertheless, we strongly recommend that our members take every step to ensure that the materials are processed responsibly and meets the criteria set out by the new rules. We also encourage our members to know your customers to ensure that the material is handled and consumed responsibly upon receipt.

We will provide additional information and guidance once we receive the full regulation.

Statement:
"ISRI has been advocating to the Chinese Government for nearly 20 years that scrap should be pulled out of the "solid waste" import regime and recognized as a valuable raw material. It appears China is doing just that with selected grades of scrap, for which we salute China for setting this important precedent. We continue to urge the Chinese Government to take steps to recognize all recyclable commodities as valuable products and call on other governments around the world to follow their lead in recognizing scrap is not waste but a necessary ingredient for achieving a green economy."  Adina Renee Adler, Assistant Vice President, International Affairs

Here's the trend in U.S. copper and aluminum scrap exports to China going back to 2016:

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Paper and Plastic The paper and the plastic domestic export markets saw declines through November of 2019 from a year earlier according to data from the US International Trade Commission. Canada, India, Hong Kong and Malaysia receive the most combined U.S. exports of plastic and paper.

Plastic Exports
U.S. exports of plastic scrap, by weight, realized significant reductions of nearly 39% YTD November 2019 versus the same time a year ago.

The top twelve countries receiving US plastic scrap exports accounted for nearly 89% of all plastic scrap exports for the first eleven months of 2019, down from their 94% market share a year earlier. Meanwhile, all other countries market share nearly doubled to over 11%. This shows that many U.S. companies are exporting more and more to less dominate plastic importing countries. Only three of these top twelve countries saw increases in the quantities received: Canada, Turkey and Indonesia.  The country in the top 12 with the greatest percentage decline of nearly 75% was Malaysia.

Canada’s share of all US plastic scrap exports nearly doubled in the first eleven months of 2019 to 22.5%, up from 12.3 percent the previous year. Malaysia’s market share went to 8.2% in the 2019 timeframe from 19.9% a year ago.

Canada continues to be the number one country for U.S. plastic scrap exports. Canada received 138,658 metric tons of plastic scrap exports YTD November 2019, a 12% increase from the same time the year before. U.S. plastic scrap exports to Malaysia decreased about 150,000 metric tons YTD November 2019 or nearly 75%.  (Table 1)

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By type of plastic scrap, styrene plastic scrap was the only type to see a gain in YTD November 2019, increasing by nearly 43% to 35,518 mt.  All other types realized double digit decreases, ranging between 28% and 69%. However, ethylene plastic scrap continues to be the most exported type, closely followed by “Other” plastic scrap.

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Paper U.S. exports of recovered paper, paperboard and pulp (paper scrap exports) decreased nearly 11% in the first eleven months of 2019 compared to the same time a year ago. The top countries accounted for over 90% of paper scrap exports in YTD November 2019, down from nearly 93% from a year ago. This indicates U.S. exporters are beginning to find new countries to export to as many of the top countries add restrictions on imports.

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Have Questions?

Joe Pickard
Chief Economist
Director, Commodities

JoePickard@isri.org
(202) 662-8542
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