Big drop in China’s 2020 scrap quota expected; scrap renaming happening soon, CMRA says

China’s import quota system, which has restricted the inflow of scrap metal this year, will remain in place for another year, with a significant drop expected in the total quantity of quotas granted, the China Nonferrous Metals Industry Association (CMRA) said on November 7.

The CMRA statement, seen by Fastmarkets, was given to delegates attending a conference from November 7-9 in Ningbo, a major metal scrap import destination in China.

Since July this year, China has had a quota system in place to curb inflows of both ferrous and non-ferrous scrap, leading to multiple scrap metal trade flow disruptions, and importers citing concerns of not receiving the quotas for overseas purchases for the fourth quarter.

“The first batch of scrap import quotas for 2020 will be announced before December 31 this year, while quota applications will be processed by provincial governments starting in December. A considerable amount of quotas will be approved in the first quarter next year compared with the rest of the year,” the CMRA said.

Quotas will still be announced on a quarterly basis, it added.

This announcement could ease the fears of the scrap metal industry which had been expecting zero quota approvals prior to the Lunar New Year holidays which start on January 25.

Still, the volume of scrap allowed into the country “would be significantly less in 2020”, paving the way for China’s ambitious outright ban of all scrap by 2021, the CMRA said.

“Most consumers in China are already buying now for 2020 arrival assuming they will get quotas, so the quotas for 2020 first quarter will be filled up very soon. Next year will be very challenging for us,” a scrap trader attending the Ningbo conference told Fastmarkets.

In the second half of 2019, China’s environmental ministry granted an import quota of 553,242 tonnes of copper scrap, with the latest batch only amounting to 11,110 tonnes.

To save the sizeable trade flow of copper scrap from a complete ban, the CMRA, which is responsible for lobbying with Chinese government on behalf of the scrap industry, proposed in May to rename copper scrap as recyclable copper raw materials, as Fastmarkets exclusively reported.

CMRA said there is now the possibility that the proposal could be implemented in 2020, meaning that overseas copper scrap could not only get into the country via the quota system, but it could only be imported into the country as a hopeful merchandise but not as solid waste.

“While the exact schedule of copper scrap renaming has not been announced, we expect it to come at the earliest April. It will take some time for us to adjust to various changes of custom codes and new definitions,” a second conference delegate in Ningbo told Fastmarkets.

“I think the Chinese government will announce the finalized renaming plan in March or April, so it can be effective for imports arriving in China from July 1 2020. There is going to be a period of six months when the quota system co-exists with the new system. Then from January 1 2021, the quota system will end because waste and scrap will be formally prohibited,” the first conference delegate said.

As of the end of October, the discount of birch/cliff was assessed at 34-37 cents per lb by Fastmarkets, equivalent to roughly 86%-87% of the London Metal Exchange three-month price, versus 31-35 cents per lb in September. A similar discount is currently cited in discussions for early 2020 deals.

The inflow of copper raw materials is strategically essential for China with copper concentrates treatment charges (TC) at multi-year lows on tight availability to make primary copper smelting in China a lot less profitable.

Fastmarkets copper concentrates TC/RC index was at $56.30 per tonne/ 5.63 cents per lb last Friday, significantly lower than the annual benchmark level of $80.80 per tonne/ 8.08 cents per lb in 2019.

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