Mix metal market outlook through Taizhou port in first cold blas
The mix metal scrap market remained sluggish this year, but it has declined further at the moment. The report from Taizhou convinced us that the mix metal market has finally entered on the era of contracted equilibrium.
Taizhou city in Zhejiang province, China is famous especially as a city where the mix meal scraps gather from all over the world.
A scrap dealer in Taizhou said that 25,000-30,000 tons of scraps had been kept in the port areas in Taizhou and overfull scraps had been piled up high like “scrap mountains” during the heyday of the mix metal scraps, but he feels extremely sad as there are actually 5,000 tons or less of mix metal scraps there.
In China, which is the epicenter of global economic slowdown, as the demands for scrap have decreased due to the scrap price drop and the continuous product price drop, the recession in scrap market has deepened in fact.
There is a processing zone near the Taizhou port and there is a scrap dismantling park where 41 companies had operated, but 2 of them went bankrupt. One of them are said to have gone into bankrupt with debt of 4 bn. The other, which began operation mainly with ferrous scraps in 2011, went out of business this year. It is said that remaining 39 companies are not operating the dismantling with enough scrap inventory, but dealing with only very few scraps which are profitable.
China outsourcing even scrap business
What has changed most is that remaining 39 companies don’t do business by themselves. In fact, they contract out their works lending names including licenses. Parent companies (owner companies holding licenses) have their subcontractors to decide the purchasing price and amount. Conversely, when the subcontractors want to purchase scraps, parent companies offer at a price they can afford to pay. Thus, the structure has been changing.
In this way, parent companies can sell scraps to the subcontractors without fail and avoid the risks in price and inventory. On the other hand, for the sellers such as Japan and overseas suppliers, those subcontractors’ purchasing price and amount is absolute and they will have to become stricter for pricing and quality than ever.
Actually, in the Taizhou processing zone, some of Japanese scrap suppliers have got a bad reputation such as “Japanese scraps are expensive and of bad quality (containing too much iron, trash, chrome-based scrap, etc.)". Above all, as the scraps sold by a dealer in Kanto region are blacklisted in the zone, it is said that the Chinese will never purchase them. The said dealer in Chiba prefecture will have a difficulty in seeking for buyers.
The prices at which the Chinese buyers could purchase in November would be cheaper than the Japanese dealers have expected. The Japanese mix metal scrap shippers would have to lower their purchasing price by JPY3/kilo at least from the current one (JPY25-27/kilo Port) for their profits. Even so, if they purchased scraps at the same high price as in the mix metal heyday without understanding the current Chinese market situation, they would put the noose around their own neck.
Home appliance mix metals also got avoided
The home appliance mix metals which rapidly had grown after 2008 are also in an extremely precarious position. China is finally stopping purchasing home appliance mix metal.
Home appliances have a lot of plastic. So, the price of Chinese mix plastic, which is less than JPY10/kilo CIF, is used as a reference.
The dealers who have expanded their business mainly dealing with home appliance mix metal are expected to be dumped into the dustbin all at once. Basically, home appliance mix metals are categorized as an unnecessary item in China.
Thus, a dealer in Kansai region is considering withdrawing from the business. The S Company, considered as an established exporter of mix metals in Kansai, has already decided to retreat from the mix metal exporting market after laying off all the Japanese staff.
Behind the worsening situation is the fact that the Chinese economic growth has become so to say normal from the unnaturally high level (The real growth rate is said to be about 2%). Further, the oversupply of the products decreased the demand for scrap. The continued price drop in steel prices brought little demand for ferrous scrap. That’s exactly like an old saying in China that iron loses money.
While the scrap deadstock (about 500 million tons) has come to an issue in China, Chinese ferrous scrap dealers are requesting the government authorities to cancel export taxes for ferrous scrap. If the Chinese scrap stock flew into Asian markets, ferrous scrap sellers could have to pay to buyers when selling their inventories on a world scale.
Chinese ferrous scrap prices have dropped to RMB650/t from 2,000/t this year. But, the prices have become a mere facade. The prices will certainly drop further due to the lack of demand for ferrous scrap in China.
While major plastic processing manufacturers have gone bankrupt one after another, waste plastics demand and price have continued to drop. More waste plastic dealers depending on the Chinese market might withdraw from the business like the above mentioned dealer in Kansai region.
A Japanese scrap shipper said, “We are entering a difficult period which is more terrible than economic crisis in 2008. If we didn’t think much of buyers’ (Chinese buyers) needs, we would be crushed.
（Edited by Sasaki）