FOCUS: EU mulls banning or restricting scrap exports in major shake-up of regulations

A radical shake-up of the European Union's waste shipment regulations could lead to a total ban or the implementation of controls on scrap metal exports from the territory, Fastmarkets understands.

The European Commission is reviewing EU rules on waste shipments to encourage more recycling within the EU and is exploring ways to reduce the exports of such materials.
EU lawmakers have been made acutely aware of the difficulties caused by exporting unprocessed plastics from Europe to developing nations in recent years and wish to prevent this from continuing. But the proposed remedies could also hurt a range of companies selling processed, clean scrap metal.
“Policymakers must make the distinction between unprocessed or untreated metal scrap and processed commodity scrap,” Emmanuel Katrakis, secretary general of the European Recycling Industries Confederation (EURIC), told Fastmarkets.
“But since metal scrap is also currently classified as waste, the options on the table may include restricting or banning the export of these materials from the EU,” he said.
“We believe free and fair trade is absolutely crucial. The scrap market is global and putting a ban on it won’t help,” Katrakis added.
During October’s Bureau of International Recycling (BIR) conference, BIR special adviser Michael Lion said the scrap industry was concerned that the EU was trying to preserve scrap metal as a resource within its internal borders.
The EC held a consultation on the regulation in May-July 2020 and aims to present its official proposal during the first quarter of 2021.
The European Parliament and the European Council will also finalize their positions on the issue and will seek to reach an agreement with the EC.
Accountability abroad
Even if processed metal scrap exports escape an outright ban or avoid restrictions, shipping such material abroad could still be made more difficult by the EC’s desire for more transparency.
The EC is mulling the rules to avoid adverse “effects on the environment and public health caused by shipments of waste to third countries outside the EU.”
This could mean European recyclers will have to take more responsibility for what happens to the scrap they sell.
“There may be an obligation for EU exporters to make sure that receiving facilities in third countries comply with EU requirements on the environmentally sound management of waste. All options are on the table,” Katrakis said.
But how this would happen in practice is unclear, with EU steel scrap commonly sold to traders outside of the EU, who then sell it on to end users. In such a situation It is unclear who would be responsible for ensuring the receiving facilities complied with EU law.
The EU is the world’s largest steel scrap exporter and shipped 21.7 million tonnes of steel scrap in 2019, along with 1.1 million tonnes of aluminium scrap.
UK position
One European country that is unlikely to be heavily affected by such EU regulatory changes is the United Kingdom, which has officially left the EU and will end its transitionary membership period on January 1, 2021.
The UK is heavily dependent on exporting metal scrap. Susie Burrage, president of the British Metals Recycling Association (BMRA) told delegates at the BIR conference that the UK produced around 11 million tonnes of metal scrap in 2019 and exported more than 9 million tonnes of that total.
If the EU curtails scrap exports in the coming years, the UK would, theoretically, be able to freely continue such exports [having left the trading bloc], which “could certainly work in our favor,” Burrage said.
Market reaction
Most market participants questioned by Fastmarkets said they thought it unlikely that there would be a ban or restrictions on metal scrap exports, but warned that, if it did take place, the consequences could be dramatic.
“There is no clarity yet on what form the measures might take, [but] a ban on exports is unlikely,” a European trader said. “But taking into account the toughening of all trade measures in Europe, it is hard to predict what the EC will come up with. A full ban would have a major impact on traditional trade flows.”
A European long steel producer source said that any restrictions on exports would have a detrimental impact on trade.
“Even if the [EC] sets additional bureaucratic requirements, they will distort export flows until customs authorities in all European countries figure out how to deal with them. The same happened with finished steel imports when the commission started safeguard measures,” the source said.
A Turkish trader expressed doubts over whether anything would ever happen.
“This [has been] discussed for a long time but [it is] never put into action. The quality of scrap in Europe is low and Turkey is almost the only country that buys it,” he said.
“They don’t really know what to do with this scrap if they limit exports, so this is always only talk. However, if this ban is put in action, Turkey would struggle with scrap supplies and [would] become addicted to the [scrap from the United States],” he added.
In January-June 2020, EU countries exported 6.14 million tonnes of scrap to Turkey, while the US exported 1.95 million tonnes of scrap to the country, according to BIR figures.
“For the moment, Italy makes a distinction between waste and secondary raw materials. The scrap we trade is classified as a secondary raw materials [so]does not need any license. Any unprocessed scrap, such as auto bundle scrap, for instance, is considered waste,” an EU scrap trader said.
“Currently, you can export both type of product, but waste products have much more severe regulations and penalties and are, therefore, not the preferred commodity,” he added.
A Middle Eastern mill source said that Italian scrap consumers would be interested in the developments because they find it difficult to procure German scrap when Turkey is actively buying from Europe.
And a Turkish mill source added that any ban or restriction on European metal scrap exports could lead to a sharp rise in Turkish scrap prices.

Cem Turken

cturken@fastmarkets.com

Maria Tanatar

maria.tanatar@fastmarkets.com

Lee Allen

lee.allen@fastmarkets.com

Published

Cem Turken

Maria Tanatar

Lee Allen

November 11, 2020

12:38 GMT

Singapore, Mugla, London