China's new application process to obtain scrap metal import licenses is likely to rule out smaller domestic firms unable to meet the strict environmental standards on scrap processing.
The Chinese government is also auditing import firms' accounts and finances as part of the approval process, a major supplier said.
The stringent checks mean that the number of licences awarded will be limited to firms that can afford the more costly environmental equipment at scrap processing plants. This is likely to lead to consolidation in China's scrap sector, market participants said.
No import licence applications have been approved to date, a number of scrap metal suppliers and Chinese buyers said last week. But some European sellers are confident that Chinese importers will be awarded licences despite the uncertainty.
Under the policy introduced in January, all scrap metal importers in China must obtain the licences by 1 July to continue with ferrous and non-ferrous deliveries to the country. But the process has been fraught with confusion and the country's environment ministry only announced in late April that provincial environmental departments will start accepting applications from scrap metal importing companies from late May. A quota will be assigned to the firms but has yet to be announced.
China is the biggest copper and aluminium scrap metal importing country in the world. The licence is likely to restrict the import volume of category 7 scrap, which contains more impurities and a lower metal content. This is to encourage the imports of cleaner scrap that is "furnace or smelter ready" without more processing, limiting the environmental impact.
