US nonferrous scrap suppliers are heralding China's adoption of new scrap standards as a victory for the industry, but stricter packaging requirements are likely to add more costs and hassle for US suppliers.
Aluminum shredded product zorba, the largest exported nonferrous scrap grade to China by volume, must be packaged because it will no longer be allowed to be loaded loosely into containers under China's new recategorization policy that goes into effect 1 July.
Market participants told Argus that skids and gaylord boxes would be acceptable to meet the new requirements, but noted that the method most likely to be adopted by the industry is bagging zorba into a woven polypropylene bag called a super sack.
"The new standard [is] not limited to only packaging with super sacks but I think the best way to load zorba would still be super sacks," one Chinese consumer said.
Super sacks are commonly used for shipping, handling and storing dry goods and various industrial raw materials. Some suppliers already super-sack certain shredded scrap items for domestic steel mills.
While they are not uncommon to the industry, their new use in exporting zorba is expected to cause some initial challenges and will likely add more costs onto each container shipped in accordance with policies.
Market participants surveyed by Argus estimate that the sacks could likely add $180-200 in costs per container, equating to a slight, 1¢/lb jump to zorba sold directly to China if super-sacked, when taking into account material costs for the bags and additional labor costs.
The additional costs will be passed on to Chinese consumers, according to US suppliers and scrap processors.
"We are going to figure out what cost makes sense. When July comes around it comes to down what China is willing to pay. If they are [paying] over the market, we will consider it," one US supplier said.
Other suppliers said that over the last year they have become less reliant on shipping zorba directly to China by shifting volumes to new markets or selling to Chinese consumers with operations based outside of the country.
"We have been selling to the same customers, it is just not going to China," a second US supplier said.
US exports of aluminum scrap, excluding used beverage cans (UBCs), for January-November 2019 totaled 1.64Mmn tonnes, up by 10pc from the same period in 2018, according to the US Commerce Department. US exports to China fell by roughly 140,000t in the first 11 months of this year, with exports to Malaysia, Korea and India climbing to help offset a portion of the declines.
Packing shipments however could help to add some freight efficiency allowing suppliers to load 20ft containers versus 40ft containers with loose zorba.
Aluminum scrap policy guidelines
The new policy which will be fully implemented in July will separate aluminum scrap into three new categories consisting of cast aluminum (ISRI code: tense), remelted sows and ingots (RSI), and aluminum fragments (zorba, twitch, tweak and shredded aluminum).
Each of these categories will be subject to a base aluminum content, a non-metallic impurity threshold, an overall metallic content and a specific metal recovery rate based as a percentage.
Zorba and other shredded aluminum scrap items will have to have a base aluminum content equal to or greater than 91pc with a total metallic content equal to or greater than 99.1pc and an impurity threshold equal to or greater than 0.9pc in order to qualify as a raw material.
Market participants said that the minimum base threshold for aluminum content of 91pc or greater will effectively safeguard against potential manipulation of metallic mixes that would be disproportionally high on copper and brass, or zinc and stainless content.
Similarly, zorba shipments will now have to be separated into three size categories, including small zorba measuring between 5-28mm, medium zorba at 28-70mm and large zorba consisting of fragments greater than 70mm.
Screening rates based on aperture size will be used to determine whether the zorba is classified properly with different packaging tags assigned to each category. Small zorba will be indicated with a white tag, medium with a blue tag and large with a green tag.
Market participants said that large zorba will likely be the most favored among processors shipping directly to China, as smaller grades are more challenging to meet the new purity standards set forth in the new policy.
By Brad MacAulay and John Betz
| New China recycled aluminum standards | |||||
| Type | Name | Al % not less than | Metallic content % not less than | Non-metallic content % not more than | Recovery rate not less than (%) |
| Aluminum scrap | Mixed aluminum castings (Tense) | 98.0 | 99.3 | 0.7 | 95.0 |
| Aluminum ingot & alloy | Remelted sows & ingots (RSI) | 100.0 | 100.0 | 0.0 | 97.0 |
| Aluminum scrap | Shredded aluminum (Zorba, Twitch, Tweak) | 91.0 | 99.1 | 0.9 | 92.0 |
| Source: Argus Media; China Non-ferrous Metals Industry Association Recycling Metal Branch (CMRA) | |||||
