Report: BIR Budapest Opportunity in Uncertain Times

January/February 2020

By Emilie Shumway

Recyclers strike a positive chord at BIR Budapest despite gloomy markets.

Through the centuries, numerous outside forces—from the Romans and Ottomans to the Nazis and Soviets—have conquered and ruled over Budapest, Hungary. Recyclers meeting there in October described feeling equally powerless, caught between great powers with different goals and agendas. Their concerns ranged from the continuing lack of clarity on future U.S.-China trade policy to governments’ exclusion of recyclers from their developing climate policies. Despite these concerns, the weak markets for many commodities, and an uncertain political future, recyclers overall remained hopeful and optimistic at the Bureau of International Recycling’s (Brussels) fall meeting in Hungary’s capital. “Change brings opportunity,” said Graeme Cameron of Sims Metal Management (New York). “It’s a very complicated short-term future, but if you take the mid- to long-term view, there are some good opportunities there.”

The recycling industry must do more to position itself “at the forefront of the climate change and environmental debate,” said BIR President Tom Bird of Chiho Environmental Group (Hong Kong), pointing to the growing public interest in the issue and the strong positive contribution the industry makes. BIR is compiling and issuing more beneficial facts and figures “to help people better argue the case” of recycling’s role, he said. It will work with the press to create greater visibility for the organization and industry; work more closely with the Global Recycling Foundation, particularly on the promotion of educational programs; and focus on adding new members and developing resources like a global database of recyclers, he said.

Murat Bayram of European Metal Recycling (Warrington, England) echoed the need for the recycling industry to make clear its contributions to the environment during a panel discussion of global trade. “There is a green hurricane outside, which could be out of control if we don’t do something in our industry” he said. In a climate protection program Germany recently introduced, the word recycling didn’t appear once, he noted. “We need incentives for companies who are using scrap,” he said.

 “Permanent Change” to Nonferrous Flows

Emerging trade and environmental policies are likely to have a lasting effect on nonferrous scrap trade flows, speakers at the Nonferrous Division meeting agreed—even after international conflicts like the U.S.-China trade war are resolved. David Chiao of Uni-All Group (Atlanta), president of the division, said global scrap flows have been “transformed.” 

Declining copper and aluminum prices are the consequence of global oversupply, explained Perrine Faye, global base metals editor at Fastmarkets (London). China’s scrap restrictions have resulted in an increased supply of lower-quality scrap grades outside of China, she said: a “tsunami of scrap supply going away from China and being diverted into Southeast Asia, mainly Indonesia and Malaysia.” But while China has plentiful aluminum stocks, its secondary copper production remains “still very much in an embryonic stage,” with alternatives like blisters, concentrates, and cathodes very expensive. Thus, while copper demand has dropped in China, Faye said, its demand remains robust compared with aluminum. 

Strong reactions to Chinese policy announcements have driven the copper scrap discount to diverge from the London Metal Exchange copper price at times over the past two years, Faye said, but overall copper scrap discounts continue to have a strong correlation with the LME price and its ups and downs in the market. With aluminum, on the other hand, “there’ve been no ups and downs—there’ve just been downs.” The “strong downtrend” is largely a result of oversupply and weak demand from the automotive sector, Faye said. The shift toward more hybrid vehicles and away from diesel engines means “the market is shifting towards primary foundry alloys” instead of secondary, she said. Thus, even if the United States resolves its trade conflict with China, low aluminum scrap prices are likely to persist.

Due to the massive investments being made in Southeast Asia, Faye said she doesn’t anticipate a shift in trade back to the old patterns, even if the U.S.-China trade war settles. Bayram agreed. “This is a perfect storm of our markets,” he said, referring to the combined impact of the trade war, oversupply, and environmental policies. “There is no way back … We need to fasten our seat belts.”

He and other panelists emphasized the need to go back to the fundamentals in difficult and unpredictable times. Bayram suggested recyclers focus on three things: quality, service, and reliability. Dhawal Shah of Metco Marketing (Mumbai, India) reminded recyclers of their “primary responsibility” to buy and sell “good, clean scrap.”

Andriy Putilov, chairman of the board at secondary aluminum alloy producer MZ (Kherson, Ukraine), spoke about the nonferrous scrap market in Ukraine. The duty on nonferrous scrap exports to European Union countries is 7% and to other countries is 15%—a steady improvement from a 30% duty in 2008 and a total ban on nonferrous scrap exports in 1999, Putilov said. Ukraine is a strong prospective trade partner, he said, and consumers in Ukraine want to buy more imports.

Innovation Offers Hope for Plastics

While global geopolitical and policymaking trends pose challenges for the recycled plastics industry, speakers on the Plastics Committee panel expressed optimism regarding the scale of technological innovation and the increase in brands’ voluntary commitments to using recycled plastic in their products and packaging. “I’m not very positive for the short term,” said Henk Alssema, chairman of the committee and of Vita Plastics (Leek, Netherlands), citing the mid-September attack on a Saudi Arabian oil facility and the possibility of global recession. “For the long term, I’m more positive.”

In the United States, negative views of plastic combined with a stronger desire for effective recycling have created challenges and opportunities, said Sally Houghton of the Plastic Recycling Corp. of California (Sonoma, Calif.). Nationwide, the plastic scrap export market has “all but disappeared,” she said, calling it the “new reality.” U.S. companies are increasing their investments in technologies to process lower-grade plastics that once would have been exported to Asia, she said.

Focusing on the situation in California, Houghton described Gov. Gavin Newsom’s decision to veto a bill that would have mandated 50% recycled content in plastic bottles by 2030 as “surprising.” Public opinion in California has led to bans at the local level—including a ban on the sale of plastic water bottles at San Francisco International Airport—and poor markets have caused some communities to cancel their recycling collections, she said. More positively, California created a statewide commission on recycling markets and curbside recycling to analyze what is and isn’t recyclable, Houghton said.

Clement Lefebvre of Veolia Propreté France Recycling (Paris) said demand for high-quality PET is still high in France due to brand commitments, but recyclers need to invest in improving their quality to meet this demand. Plastic recyclers in Eastern Europe and Romania have been “under pressure” due to the loss of Chinese exports, said Andrei Sofian of Rematholding Co. (Bucharest, Romania). Plastic scrap prices have dropped 30% in recent months, and “more and more incinerators have appeared,” he said.

Southeast Asia is experiencing one of its “most challenging” periods ever for plastic scrap, Steve Wong of the China Scrap Plastics Association (Hong Kong) said. Difficulty selling the material due to low demand—compounded with illegal operations—have led many Southeast Asian recyclers to go bankrupt, Wong said. Plastic scrap prices in Saudi Arabia and the United Arab Emirates are “good,” Mahmoud Al Sharif of Sharif Metals International (Sharjah, United Arab Emirates) said, though demand is “a little slow.” The UAE government has invested in educating the public about recycling, and recycling businesses are expanding their facilities and setting ambitious recycling goals.

Rob de Ruiter of applied research organization TNO (The Hague, Netherlands) provided an overview of chemical recycling, the process that uses methods like depolymerization, pyrolysis, and dissolution to break down plastics into polymers and monomers for use in primary applications. While the technology is still in its infancy—de Ruiter said its viability in 10 years would be “optimistic”—he described big investments and “new connections” that are advancing the process. “It is about system optimization,” de Ruiter said. “You need everyone in the chain.” He pointed to partnerships between Dow Chemical and Fuenix and BASF and ChemCycling as some of the new thermochemical agreements emerging in the sector.

Government Policies Encourage, Stifle E-Scrap Recycling

Countries’ concerns about end-of-life electronics are guiding decisions that are both beneficial and harmful for electronics recyclers, according to speakers on the E-Scrap Committee panel. Most scrap plastic that would have gone to China is now going to Southeast Asia due to China’s import ban, according to Steve Wong of the China Scrap Plastics Association (Hong Kong). Several countries in the region are also beginning to impose more stringent controls and crack down on illegal operations, he noted, and some are no longer allowing imports of electronics plastic at all, he said.

India has allowed exports of e-scrap, including printed circuit boards, since July, said Surendra Borad Patawari of Gemini Corp. (Antwerp, Belgium). India’s changing attitude toward postconsumer plastic is responsible for the relaxation in policy, Patawari said, noting that “plastics has become a very important word… In India, it’s been identified with pollution.” The volume of end-of-life electronics in India is growing 20% a year, Patawari said, and it is expected to reach more than 5 million mt by 2020, according to a study conducted by the Associated Chambers of Commerce and Industry, India, and Ernst and Young. “India is going to be a very important market for the e-scrap business,” he said.

Chris Slijkhuis of the Müller-Guttenbrunn Group (Amstetten, Austria) described his company’s experiences working to process e-scrap and move it across borders in Europe. While recognized recycling companies like his receive material collected from municipal and retail sources, they still compete with a thriving informal market of illegal scavenging, collection, and exportation in Central and Eastern Europe, resulting in major losses. “The informal network is in fact bigger than the formal network,” he said.

Bureaucratic slowness is also an impediment to trade within Europe, Slijkhuis said. The involvement of large files requiring original signatures, a lack of harmonized rules and procedures, and major costs and delays can result in what he called “the big waiting.” The Müller-Guttenbrunn Group has joined a European stakeholder group working to reduce barriers to trade. It has also invested in new plastic recycling technology with the goal of becoming the first company in the world to recycle polycarbonate-acrylonitrile butadiene styrene from electronics, he said.

Concerns over brominated flame retardants are another challenge to e-scrap recycling, Slijkhuis said. Last year, the European Union considered setting the allowable threshold of BFRs at 10 parts per million—a move that would have “been the end of our recycling,” he said. (The limit was set at 1,000 ppm.) Governments should adopt a “risk approach” rather than a “hazard approach” to e-scrap material, Slijkhuis suggested.

ISRI’s Robin Wiener called for recyclers to develop standards for who are legitimate recyclers to guide governments in better understanding the industry.

‘New Homes’ For Ferrous Emerge in Slowdown

Geopolitical difficulties and government policy took center stage for those at the Ferrous Division meeting. Though participants noted the growth of protectionist trade policies globally, they also highlighted opportunities presented by new trade partners.

Although the first half of the year brought a decline of 16.4% in Turkish ferrous scrap import purchases, Turkey remains the world’s “foremost steel scrap importer,” said Rolf Willeke, statistics adviser of BIR, during an update on world steel recycling. U.S. import tariffs on Turkish steel, a weak Turkish economy, and “sluggish long steel demand” were all to blame for the decline, Willeke said. Still, Turkey imported more than
9 million mt of ferrous scrap from January to June 2019, nearly three times that of the world’s next largest importer, India. The European Union is still the world’s largest scrap exporter, shipping 11 million mt—an increase of 3% from 2018—with the United States following at 8.6 million mt, nearly the same export level as 2018. While there were export declines in the studied period from Japan, Russia, Canada, Hong Kong, and Singapore, Willeke said, a clear outlier was Australia, which experienced a 36% increase in steel scrap exports compared with the same period in 2018.

China’s steel scrap use increased 20.7% in the first six months of 2019, Willeke said, to 103 million mt, compared with 85.6 million mt for the same period in 2018. The country has ramped up its ferrous scrap consumption to keep up with higher emissions standards set by its government, investing in electric-arc furnace production and increasing its total crude steel production roughly 10% in the first six months of 2019 compared with the same period in 2018, Willeke said.           

Becky E. Hites, president of Steel-Insights (Atlanta), also emphasized Chinese crude steel production and the country’s investment in EAF steelmaking. China’s EAFs produced 120 million mt of crude steel in 2018—a jump from 80 million mt the year before. Hites predicted that while most countries would see their EAF steel production level off in 2019 and beyond, China would continue growing, producing more than 140 million mt by 2022. The United States, India, Vietnam, Iran, and Egypt will also ramp up EAF steel production in the years ahead, Hites said. She expressed optimism that “next year steel production is going to be good” despite her expectations of a global economic slowdown with a lack of growth particularly in France, Germany, Italy, South Korea, and Russia. Even so, “I’m not looking for a huge recession,” she said. 

Though she described herself as bullish on the 2020 outlook for steel production, Hites acknowledged the “global economic puzzles” that continue to complicate the steel scrap market, a concern others on the panel echoed. “The whole world is feeling [the] effects” of the trade war between the United States and China, said Greg Schnitzer of Schnitzer Steel Industries (Portland, Ore.), Ferrous Division president. “Luckily,” he noted, there has been a “shift in the market offsetting any kind of negative effects” caused by not being able to ship into China, including the opening of new markets in countries including Vietnam and Bangladesh. Viktor Kovshevny of Ruslom.com (Moscow) spoke about Russia’s move toward ferrous scrap export restrictions, including government quotas on how much ferrous scrap can be exported and a government proposal of a metal exchange platform to be launched in spring 2020. He described scrap company efforts to convince the government to abandon the idea.

George Adams of SA Recycling (Orange, Calif.) expressed excitement about the rash of new steel mills coming online in the United States, but he voiced concern about how the “longest-running expansion ever” might affect future prices. He also cautioned that he expects a shift to more electric vehicles and far fewer vehicles overall, complicating the future of the steel industry. “I think that’s a huge concern for my business,” he said, “but probably more for my kids than it is for me.”

Nickel Soars While Stainless Flounders

Speakers at the Stainless Steel and Special Alloys Committee puzzled over nickel’s booming prices and the slump in stainless prices, a situation Joost van Kleef of Oryx Stainless (Dordrecht, Netherlands), chairman of the committee, called “confusing.”

Nickel is the “single outperformer” among base and precious metals this year, said Natalie Scott-Gray, senior metals analyst at INTL FC Stone (New York). She noted a 65% year-to-date increase in its value, with nickel reaching $18,000 per mt on the London Metal Exchange in September—its highest valuation since 2014. The key drivers are threefold, she said: “robust production in Chinese nickel pig iron” as China has ramped up its stainless steel production, booming battery demand for electric vehicles, and falling LME nickel warehouse stocks. Indonesia’s decision to impose a complete ban on nickel exports in January 2020—rather than January 2022, as previously stated—has further exacerbated a rise in prices due to supply concerns, she said.

Stainless steel is currently 70% of the end use for nickel, and Scott-Gray expects global stainless steel melt production to increase 16% from 2020 to 2025. However, Indonesia’s ban on nickel exports will affect global supply outside that country, especially in China. The Philippines, the second-largest exporter of nickel ore, will not be able to fill the gap, Scott-Gray said. Indonesia’s stainless steel production will rise as China’s falls, she predicted. While the electric vehicle industry’s demand for nickel is projected to increase, she said, stainless will remain the primary consumer and price driver up to at least 2030. A potential lawsuit levied by the European Union against the World Trade Organization over the Indonesia nickel ban causing supply shortages may complicate things, she said.

Olivier Masson, senior analyst at Roskill Commodity Research (London), also acknowledged the importance of stainless to nickel, noting that “between 2006 and 2018, primary nickel consumption by the stainless steel industry has doubled.” He also pointed out that, despite its strong price performance compared with other metals, the price is not “historically high.” Like Scott-Gray, Masson expects stainless production and electric vehicles to keep demand for nickel high in the years to come, particularly demand for Class I nickel and nickel sulphate. Greater Class I nickel use by that sector could result in greater use of scrap by the stainless industry, he noted. While China and Indonesia are focused on the use of nickel pig iron in stainless production, the United States, Europe, and India remain “more reliant on scrap,” a trend he expects to continue.

Tyres Looks at Increasing Material Recovery

Committee Chairman Max Craipeau of Greencore Resources (Hong Kong) emphasized to the Tyres and Rubber Committee his hope of developing more “bilateral cooperation” between industries in the West and Asia. In China, Craipeau said, around 90% of the more than 6 million tons of end-of-life tire scrap generated each year is recycled into reclaimed rubber that can be used again in new tires and other rubber products. This reuse benefits recyclers because the material has more value; it benefits the environment through the use of less virgin material; it benefits tire and rubber manufacturers, who have lower compounding costs; and it benefits end users, who pay less for the products. Europe, in comparison, only recycles into reclaimed rubber about 30,000 mt of the 4 million end-of-life tires generated each year—less than 1% of the total. Most end-of-life tires in Europe and the United States are “downcycled” into crumb rubber or fuel, Craipeau said, although tire recovery in Europe has at least shifted toward a 50/50 balance of material recovery and energy recovery in the past 15 years.

Craipeau encouraged a circular economy model for end-of-life tires that emphasizes the production of reclaimed rubber. He pointed to potential examples of legislative support, noting that the European Commission Circular Economy Package adopted in December 2015 mandates that PET bottle producers use 25% recycled content in their new bottles. Companies are also making commitments to use more recycled content.

One challenge that continues to afflict the material recovery from end-of-life tires is public concern over the safety of crumb rubber, said Fazilet Cinaralp, secretary general of the European Tyre and Rubber Manufacturers’ Association (Brussels). In Europe, regulatory initiatives are being proposed on polycyclic aromatic hydrocarbons, microplastics (including vulcanized rubber and granules, under the proposed definition), and potentially other substances found in artificial turf infill material. The European Chemicals Agency and European Commission are under pressure to clarify their proposals, and Cinaralp said she expects a decision shortly regarding an exception for recycled rubber infill material, though the conditions of the exception remained unclear.

ETRMA has pursued two initiatives to help allay public concern over the use of crumb rubber, Cinaralp said. It invested in a major risk assessment of synthetic turf rubber infill, a multiyear project which tested tire-derived rubber from nearly 100 sources, quantified the presence of various substances of concern, and analyzed the potential harm to players on the turf and workers who install it. Cinaralp expects the results to be published in a peer-reviewed journal this spring.

Further, the Scandinavian tire industry is developing a certification system to identify and support responsible end-of-life tire recycling, Cinaralp said. The system, which she expects to launch in March, will be based on legal and regulatory compliance, traceability of material flows, good safety and environmental performance, and other factors. 

IEC Meeting Highlights Opportunities, Challenges of Regulation

Plastics was the focus of the International Environmental Council meeting. Emmanuel Katrakis, secretary general of the European Recycling Industries’ Confederation, identified two factors that have recently shaped the plastics recycling industry: trade restrictions and public awareness. “Plastic has become a big buzzword,” Katrakis said, noting he’d been living and working in Brussels for 10 years and had “never seen such a strong reaction” as has recently gripped the region in response to the ocean plastics issue. While only 1% to 2% of the end-of-life plastics leaking into the ocean comes from Europe and the United States, public response to coverage on ocean waste has stimulated ambitious goals for reducing the use of plastics. Targets set in the European Union’s Waste Framework Directive and Packaging and Packaging Waste Directive set a floor for the proportion of packaging waste to be recycled. In a boost for the plastics recycling industry, the directives also set minimum recycled content mandates for beverage bottles: 25% for PET by 2025 and 30% for all plastic bottles by 2030. “There will need to be a lot of investments” to meet these targets, as well as a need for all stakeholders to understand “how recycling works in practice,” he said. But he called the recycled content targets, voluntary commitments from brand owners, and the corporate and consumer response to plastic waste “game changers.”

“Substances of very high concern”—chemical substances that the European Union has identified as potentially harmful and therefore subject to regulation under the Registration, Evaluation, Authorization and Restriction of Chemicals policy—are the “Damocles sword” hanging over the industry, Katrakis said. There were 191 SVHC categorized at the end of 2018, he said, and the final target is 3,000 substances. Many of those may be found in polymers, Katrakis said.

Jeffrey D. Kimball of Hungarian Loacker Waste Recycling described how the recycling market functions in Hungary and highlighted some of the challenges of the current system. Hungary has not met the European Union’s current goals for recovering certain recyclable materials, Kimball said, and he “just [doesn’t] know how” the country will meet those goals in the current economic climate. The government created a centralized auction system for sale of recyclables in 2018 which failed, Kimball said, and it was recently scrapped. He hopes Hungarian recyclers can work with the government to improve their cooperation and find workable solutions to meet EU goals, he said.

Emilie Shumway is senior editor/reporter for Scrap.

(SIDEBAR)

Turkey represents opportunity amid paper surplus

The European paper market is overstocked and recovered fiber value is low, speakers at the Paper Committee meeting agreed, but investments in some countries may soon create new opportunities. European collection of recovered fiber is 56.7 million tons per year, Sebastien Ricard of Paprec (Paris) said, but consumption is only 48.8 million tons. While most recovered fiber exports used to go to China, speakers noted, China has drastically reduced its imports—and most of those are coming from the United States. With prices “collapsed,” Ricard noted, cardboard is currently near its lowest previously recorded price, from August 2009, and mills are demanding higher quality.

Turkey may be crucial to solving the recovered fiber oversupply problem, said Ercan Yürekli of the National Association of Turkish Paper and Plastic Recyclers and Collectors (Ankara, Turkey). The Turkish fiber collection rate is at 40% and shows no signs of increasing, but Turkish paper mills will have a production capacity of 6 million or 7 million mt within a few years. Recovered paper imports have increased from 300,000 tons in 2015 to an expected 1 million tons in 2019, and Yürekli estimated that could soon rise to 2 million to 3 million mt.

(SIDEBAR)

Textiles face a sluggish market and new recycling standards for mattresses take shape

Increasing volumes of collected textiles combined with decreased material quality have led to unfavorable textile markets, said Martin Boeschen of TEXAID (Schattdorf, Switzerland). Greater awareness of textile recycling has resulted in the oversupply, Boeschen noted, while inferior collection methods have increased contamination. Pol T’Jollyn of Recutex (Zulte, Belgium) echoed this concern, citing the European Commission’s directive for separate household collection of textiles by 2025, which he said is causing consumers to send even low-quality textiles for recycling. The result is that recyclers must send more material for incineration. Both noted that prices have not improved on the international market, as African customers struggle to obtain currency and Eastern European markets demand higher quality. While Mehdi Zerroug of Framimex (Appilly, France) agreed that prices remain low, he offered a sunnier outlook, saying the French market for used clothing is steady and that an expected slowdown in collection through the winter should lead to a lower supply and higher prices.

Alan Wheeler of the Textile Recycling Association (London) anticipated difficulties for the industry in the U.K. due to a potential no-deal Brexit. Moving forward with no deal could create disruption to supply chains, greater scrutiny of recycled textile exports going into Europe, and European import duties on clothing products, Wheeler said. He also decried the United Kingdom’s proposal to prevent businesses from hiring foreign workers, including European Union nationals, for jobs that pay less than £30,000 per year. “It is utterly absurd,” he said. “There needs to be a clear and unambiguous exemption for those working in the used textiles and waste management industries.”

Wheeler also addressed new mattress recycling standards the Textile Recycling Association and the National Bed Federation, a bed manufacturer trade group, have developed in the United Kingdom. The partners formed the Register of Approved Mattress Recyclers to set industry standards and represent this recycling sector. Accredited members of RAMR will submit to an audit to ensure they meet established standards in health and safety, employment law and labor, environmental compliance, and sound business practices, Wheeler said. RAMR had completed three pilot audits by mid-October and Wheeler anticipated a public launch of the organization in the U.K. in early 2020.