The tariff applies to products under Harmonized Tariff Code 7602.00, which refers to aluminium waste and scrap. Chinese buyers are facing a potentially steep increase on prices of US-sourced material, and market players are scrambling to confirm whether shipments on the open seas are covered by the 25% duties.
The announcement comes in response to what China perceives as protectionist trade measures from the US, setting its 25% tariff after the US ignored a consultation request on March 26 to discuss trade, according to a statement from a spokesman for China’s Ministry of Commerce.
“In view of the lack of agreement between the two sides, on March 29, China... decided to impose tariffs on certain products imported from the US in order to balance the benefits of the US [Section] 232 measures against the Chinese,” the spokesman said on April 2.
Despite the lack of dialogue between both nations, China said it still remains open to work together to resolve trade disputes.
“As the two largest economies in the world, cooperation between China and the United States is the only correct choice. The two sides should resolve their concerns through dialogue and negotiation, achieve common development, and avoid subsequent actions that will cause greater damage to the overall Sino-US cooperation,” the Ministry of Commerce said.
In 2017, the US exported 958,584 tons of aluminium scrap to China (including Hong Kong), up nearly 19% from 812,661 tons the previous year. Market participants estimated that more than 70% of total aluminium scrap shipments to China is zorba, with some suggesting that figure could even be as high as 90%.
“The market is frozen... A 25% tariff on [60-cent-per-lb] zorba is as much as 15 more cents per lb. You can’t absorb that. This kills the overseas zorba market,” one exporter said.
Some market sources said that the immediate implementation means the tariff could be applied to containers on the water, which could create challenges for exporters and severely impact prices.
“They’ve imposed it on everything that is on water, so any of the importers that have material sitting are going to want to renegotiate if they haven’t paid in advance… Zorba most likely will drop by a meaningful amount, and this will keep more material in the states and further oversupply the market, which will effect twitch,” a second exporter said.
Key details are still unknown. Market participants said they are waiting for more specificity on what will be covered, citing scrap that is processed into aluminium products for export in particular.
Sources said that approximately half of the scrap shipped to China from the US is processed and subsequently exported, a fact which could shield that stream from the tariffs and duties.
The remaining scrap consumed by China’s domestic industry is subject to the tariff, sources noted.
“We are working to define what all this includes, [and are mainly concerned with] scrap that will be exported back out. This scrap might not be taxed,” a third exporter said.
The move impacts more than $1 billion worth of exports, according to the Institute of Scrap Recycling Industries (ISRI).
“ISRI had been hopeful that discussions between the United States and China could have prevented the imposition of tariffs on US aluminium scrap into China. The move impacts nearly $1.2 billion worth of US exports [that are] in strong demand by China’s manufacturers, significantly impairing the US scrap trade surplus with China,” an ISRI spokesman told American Metal Market.
China has dealt the US aluminium scrap industry a serious blow and created mayhem by officially slapping a blanket 25% tariff on recycled aluminium from the United States, effective Monday April 2.