The ripple effects of China’s scrap import ban have far from settled.
Since Nov. 2017, the U.S. waste industry has been in an uproar over China’s crackdown on imports of several categories of scrap goods. Recycling markets in all 50 states have been disrupted, as exporters race to find new markets for their products. The disruption was only aggravated May 4, 2018, when China decertified the primary group able to pre-certify scrap imports for a month, leading to a de facto halt in exports.
Now, the effects are spreading beyond waste exporters and recyclers to the supply chain stakeholders that service them. Ports and ocean carriers have seen a remarkable drop in volumes in the first quarter of this year, as scrap goods are diverted to other destinations in Asia, according to data sent to Supply Chain Dive.
West Coast ports suffer from loss of volume
Thirty-two categories of scrap products are in the crosshairs, as China vows to control the types of waste it accepts by the end of 2019.
The extensive ban, announced mid-April, will have “an impact on more than 676,000 metric tons, worth about $278 million, in U.S. scrap commodity exports to China in the first year and another 85,000 metric tons worth more than $117 million in the second year,” according to a statement by the Institute of Scrap Recycling Industries (ISRI).
Already, the U.S. ports closest to China are feeling the effects, as shippers send would-be scrap cargo to landfills instead of abroad.
"The more stringent standard was about reducing contamination, which has been difficult for recyclers to meet," Tara Mattina, communications director for the Northwest Seaport Alliance, told Supply Chain Dive in an e-mail. "That has resulted in reduced wastepaper exports through our gateway."
The Alliance, which represents the Port of Seattle and the Port of Tacoma, among others in Washington, saw a 29% YoY drop in wastepaper exports in January 2018.
The Port of Long Beach has also seen a 29% drop in waste and scrap paper exports since September 2017, when the gateway exported more than 21,000 TEUs of the material. Since then, it’s been between 13,000 to 15,000 TEUs per month, Lee Peterson, media relations manager at the Port of Long Beach, told Supply Chain Dive in an e-mail.
"We have heard estimates of around 25-30% volume decrease of total wastepaper and plastic scrap exports."
Media Relations Manager, Port of Long Beach
"Normally, you might want to wait until you see the second and third quarter of this year to find out if it’s really down, because those are the busier times of year for export of the material," Peterson said. "But what we are hearing from the beneficial cargo owners (BCOs) is that waste paper and household plastic scrap has completely stopped going to China."
The Port of Oakland told Supply Chain Dive it is "too soon to know" the effects of the ban, but in March, exports were flat after three straight months of growth. 'China’s policies may have affected the outcome," Michael Zampa, director of communications at the Port of Oakland, said in an e-mail.
The effects are more stark at a category level. Resource Recycling broke down how various polymer exports were affected by the policy at the Port of Los Angeles in a recent report. When compared to January 2017, this year five categories of polymers saw a more than 80% drop in exports to China and Hong Kong.
Many of the products were instead diverted to countries around the world, with polystyrene, for example, seeing a 595% YoY export growth to countries other than China and Hong Kong, according to the article.
India and Indonesia gain imports, but not enough
Scrap goods cannot just sit at production facilities, warehouses or terminals forever; they must eventually go somewhere.
While anecdotes from Waste Dive’s analysis of market effects in all 50 states suggest many of these products are going to landfills as a temporary measure, U.S. exporters are actively looking for new markets willing to buy their scrap. Many have found new clients in countries nearby China, but the new markets have not been able to keep up in terms of volume imported, according to various sources.
“BCOs are working with markets in Southeast Asia and India, but that’s not making up the difference,” said Peterson. “We have heard estimates of around 25-30% volume decrease of total wastepaper and plastic scrap exports.”
The reality is, China far outpaced other countries as the top importer of U.S. scrap, and new markets take time to mature.
At the Northwest Seaport Alliance, for example, China accounted for 83% of wastepaper and paperboard exports in 2016 and 78% in 2017, "by far our largest export market" in the category, said Mattina. Today, she added, "that percentage has dropped to 45 percent of wastepaper export volume through March 2018.”
During the same period of time, India’s share of wastepaper/paperboard exports grew from 1.7% to 21%, while Indonesia’s share grew from 4% to 13%, Mattina said.
The question, however, is whether the new markets will suffice in the long-run as substitutes for China, or if the restrictive policy will beckon permanent change for the industry.
Ocean liners see the side effects of an import ban
In recent months, ocean carriers have seen the effects of diversion first hand, as the parties responsible for moving the goods first hand to new markets.
Data provided by Orient Overseas Container Lines (OOCL) and extracted from JOC.com suggests the diversion is widespread, with total volumes of waste exports rising 152% YoY to India and 57% YoY to Indonesia during the first quarter of 2018.
However, the shift also comes with less-full ships going to China.
Maersk Line mentioned the scrap ban as a primary driver of a decline in shipments to Asia during the first quarter of 2018. “Asian imports from the US and Europe declined significantly, reflecting the ongoing Chinese ban of waste and scrap metals as well as a gradual slowdown of the Chinese economy,” the company said in its interim report.
Total Waste Volume by Country, in TEUs
|Q1 2017||Q1 2018||% change|
SOURCE: JOC.com data, courtesy of OOCL
As new markets develop, exporters, ports and carriers will have to adapt to potentially new shipping routes to serve new clients’ needs.
In a recent earnings call, CEO John Casella of Casella Waste Services said exporting material to India or Vietnam costs double, compared to the prices paid to export to China.
Containers, too, may become an issue as the trajectory of front- and back-hauls shift, over time.
The head of Republic Services told Waste Dive in an interview in April: "There's no availability of shipping containers. No ships are calling in anytime soon."
OOCL said it has not experienced any such operational issues, but other issues are worth noting.
In particular, the May 4 decertification announcement complicated the export process, requiring more extensive inspection and, in some cases, lab testing. “Any cargo failing the inspections will be required to return to the port of loading (or origin),” an OOCL spokesperson said in an e-mail.
“At this stage, it is still too early to determine the level of impact on the overall trade,” he added. “But we are closely monitoring this development.”
As is the entire waste industry.