Coronavirus is severely impacting China’s recycling sector.  Currently, twenty-seven major Chinese cities are in lockdown as a result of the virus.   The inability to get scrap through to the mills is proving to be a major problem.  With virtually no transport the imported scrap into China has nowhere to go.

The government has prohibited factories, including scrap recycling facilities, from operating. Many workers in coastal areas have been ordered to say home until the coronavirus is contained.   Some port authorities have waved demurrage and detention fees to help importers during this difficult time.

Global markets impacted

The impact on the scrap metal market has not been significant to this point, with product being shipped elsewhere.  However, if the epidemic outbreak is not under control by early March the metal market will be affected.   With the virus outbreak many scrap recycling facilities and smelters were unable to restart production after the Chinese New Year.

The virus is also disrupting stock levels in the Plastics Industry.  This is impacting on business sentiment with negative perceptions within the industry on the short-term future of plastics recycling.

The impact on the domestic Chinese economy is significant both with the slowdown in employment and the impact on supply chain logistics.  Many Australian businesses are concerned about a shortage of supplies into their businesses over the next few months.

The virus will have implications for the Australian economy and the local recycling industry.  A short term oversupply of scrap in global markets that cannot be processed is a potential risk.  This would also reduce the amount of recycled steel material going to smelters with an impact on steel pricing.  Potential supply chain difficulties to manufacturing around the world may also be a by-product if the pandemic continues in China.

Recycal monitor global trends in the scrap metal market and will work with its clients to ensure the short-term implications of the Chinese situation are minimised.

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