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Where in the world?

“Ferrous is defined strictly by where there are smelters,” says British Metals Recycling Association director general Ian Hetherington. “There seems to be emerging trends as well as emerging markets.”

According to Hetherington, the UK steel market has been declining since the 1970s, as smelters have closed or current smelters have reduced the amount of scrap they are buying. This has led traders to export more.

“There has been a growth in containerised exports too,” Hetherington explains. “Historically, materials were exported from large dock facilities in very large shiploads. But, nowadays, it is feasible with high-grade recycled material to export this by container loads, which are much cheaper to move and therefore they can go further distances than were able to 20 years ago.”

Currently, the most important market for ferrous scrap is Turkey because it is such a large steel producer. The country uses two sorts of furnace:

  • integrated furnaces, which are older systems most commonly seen in the UK and take around 40% scrap, producing flat steel used to manufacture cars; and
  • electric arc furnaces, which can produce long steel from entirely scrap material, which is used in construction.

Spain, which has been a strong market, is currently in decline, which may be to do with its recent economic problems. There are also exports further afield to countries such as India and China.

Hetherington says: “Exports to China are a relatively recent development, which has come about during the past two years as a result of the low cost of container-loads. It’s not a huge market because, despite the low shipping costs, the distances are huge and it makes sense for them to get supplies locally rather than from the UK.The most surprising markets the UK exports to are Bangladesh - because it is not expected to have much industrial action - and Thailand, because it is such a considerable distance.”

Main importers of scrap steel in 2009 (tonnes)
Turkey 15 million
China 13 million
South Korea 8 million
India 5 million
Taiwan 4 million
EU 3 million
United States 3 million

UK exports 2009 (tonnes)
Spain 1.4 million
Rest of Europe (including Spain) 2.4 million
Turkey 1.6 million
India 1.4 million
Egypt 1 million
Thailand 200,000
China 60,000

Because of waste shipping regulations, the UK is unable to send material to some countries because they do not accept waste, a definition which includes scrap metal. “It does not affect ferrous too much, but it is an issue for aluminium,” says Hetherington. “The Middle East is very reluctant to sign up for any waste at all and this is where large aluminium producers are situated, which could be a major market for them.”

China is the main buyer of aluminium and copper; with a population of 1.4 billion still without electricity, it needs the materials to develop its electrical infrastructure. In Europe, meanwhile, Germany is the biggest importer of aluminium and copper scrap, where it uses the material for its manufacturing base. Demand for material from Taiwan, South Korea, Hong Kong and other Asian countries is fairly even.

“The economics of buying it [non-ferrous] are different because the higher the value of the load, the relative value of the shipping cost goes down,” says Hetherington. “So because the value of non-ferrous is so much higher [than ferrous], you don’t mind where you buy it from. Ferrous doesn’t travel as far.”

Chairman of the International Council of the Bureau of International Recycling, president of Eurometric and managing director of Voss International Robert Voss adds: “There are markets throughout the Pacific rim for non-ferrous: Vietnam, Indonesia, the Philippines, Thailand. Every emerging country, particularly the Asian countries, needs metal. This is not anything new, though, and this is not going to change. China and India have been significant marketplaces during the past five to ten years.”

Brazil is another emerging market, as it develops its infrastructure further. But the rest of South America is not at the same stage of development, with far less infrastructure.

“The markets still have not completely recovered from the economic downturn,” Voss comments. “Demand is still quite weak, and with more talk about the potential for a double-dip recession, companies are holding off buying more material.”

Historically, China has been the main receiver of UK paper because of the large amount of packaged manufactured goods it exports. The UK recovers the cardboard boxes (OCC), which are returned to China. There has been concern in the past couple of years that the UK relies too heavily on China as an export market, particularly when the markets crashed in 2008.

According to figures from the Confederation of Paper Industries (CPI), Chinese global imports of recovered paper for the first seven months of 2010 were 14.4 million tonnes, 12% down from the same period in 2009. Furthermore, the main suppliers to China in the past seven months have been the US at 40%, Europe (excluding the UK) at 19%, the UK at 11% and the rest of the world at 15%.

CPI recovered paper manager Peter Seggie says: “The reduction of imports to China could be due to a fall in demand for finished paper products and/or a fall in global recovered paper availability due to the poor economic conditions. It may also be an effect of increased Chinese domestic collections offsetting some of the imports.”

China’s investment in its own recycling infra-structure has certainly affected the global paper market, according to paper recycler ACN Europe managing director Wade Shuetzeberg. “We will definitely see a changing balance in packaging exports, as China will not necessarily have to import as much material when more packaging stays in the country,” he says. “China will increasingly be able to fulfil demand domestically. There is a growing middle class consuming more goods and therefore more container board so, domestically, they can get fibre.

“It’s a bit of a crazy statement, but it will be interesting to see when China will export its own recovered paper. As it develops its infrastructure, it will collect more and more recyclables, although it will be 20 or 40 years’ down the line.”

But it seems that demand for cardboard has picked up in northern Europe, where three new paper mills have started up in the past year, demanding significant amounts of material. Mark Lyndon managing director Paul Briggs explains: “In the past six months, one of the markets that has been buying heavily is northern Europe. It wants OCC grades and might take in a few high grades too. It is taking significant amounts, which has not happened for many years. Is that trend going to continue? I don’t know, but I believe there is a possibility it might.

“Germany, Poland and the Czech Republic have opened mills around the same time. It is having a significant impact on the market: when they’re in the market they are pushing prices up by £20 a tonne. I wouldn’t say northern Europe is an emerging market but it is a change from where it has been.”

Indeed, statistics from the CPI show that Germany has increased its imports of UK recovered fibre in the first seven months of this year by 159%. The CPI’s figures on China do not surprise Briggs, who says the UK’s significance there will lessen as China uses more of its own paper.

“A big percentage of their machines will use material that has come from domestic sources, allowing in certain market conditions for China to withdraw from other markets,” he says. “So although the volume we send there might not change, our importance to their paper market will.

“I don’t think this will cause too much concern because while China exports product to the UK, there will always be a market for OCC in China. Most in the industry have years of experience in coping with volatile markets - and if any industry can cope with a volatile market it’s this one.”

Vietnam will be a presence to watch too. Briggs believes the country will eventually become a “mini-China”, as it buys in paper machines ready to start up in the next six months. But Briggs warns: “Although Vietnam may come online, it won’t necessarily mean more demand because Vietnam will just take the shortfall from China. There may also be a slight shift as Vietnam produces cheaper goods than China, but I suspect China is driving the growth in Vietnam.”

Seggie adds: “South Korean demand for UK recovered paper appears to be picking up a little but, in comparison to the overall picture, it is pretty miniscule. Basically, the domestic market along with China, Europe, India and Indonesia remain the UK’s main markets for recovered fibre.”

Commenting on the current state of the UK recovered paper market, Seggie says: “This year’s paper consumption in the UK is rising slightly at 2% in comparison with the same period in 2009 as the economy picks up a little. But the austerity measures expected in the coming years may curtail this.”

“China will buy any type of plastic for its manufacturing requirements,” says AWS Eco Plastics commercial director Duncan Oakes. “But one type of object that has seen reduced export to China is plastic bottles, because domestic consumption and the large infrastructure has meant the need for them to be exported is dramatically reduced.

“China has its own domestic market which is growing, but they will continue to take any plastics from abroad.”

China’s huge rate of growth and development has led to it becoming a huge power in the materials markets, taking anything that is useful and recyclable.

Oakes continues: “Nine times out of ten, anything we’re exporting will go to China. Some people may export to Malaysia, and I’m told Indonesia is another country that is on the radar, but there is a need to take care over illegal exports to countries that are not signed up to accept exports from EU members.”

ACN Europe UK also deals in the plastics market. Market manager Steven Farncomb says: “The Chinese and Asian markets still remain strong for parts of the sector, particularly film grades. Previous to the past 18 months to two years, a lot of the bottle grades went there, with India taking PET bottles and China PET, HDPE and mixed.

“But there has been a dramatic increase in sorting and infrastructure capacity in domestic European markets which has driven up demand and prices, especially because there has been no increase in the total amount of bottles being recovered.

“Furthermore, in Europe, they are creating higher grade plastic that is food-grade, so the quality is better than the Asian markets. I think Asia has had to switch its source geographically to places where it does not have domestic markets. As long as it can fulfil demand from these parts, they won’t try to compete with the European material. But as Chinese GDP increases, we will see them moving towards competing with it.”

According to PlasticsEurope regional director for the north Jan-Erik Johansson, India will play an increasing role by taking more material, while Vietnam may pick up some of the material China declines.

Oakes adds that container costs have reduced by 50% during the past six months, which makes it easier for companies to export through cutting their costs. Currency and exchange rates will dictate whether to sell to Europe or the Far East.

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