US non-ferrous scrap exporters are weighing their options and considering what to do with thousands of non-ferrous scrap containers now stuck in limbo following China’s sudden suspension of its North American customs inspection division.

The Chinese government's decision to implement a 30-day suspension on the inspection operations of the Chinese Certification and Inspection Group (CCIC) North America division has disrupted the global scrap trade and shocked recyclers around the world.



“This is the most impactful thing that has ever happened to our industry. It is even worse than the 2008 crash because at least that event was somewhat of a slow creeping event. This however has happened in such a short window, out of the blue and specifically targeted at the scrap industry,” one exporter said.



CCIC’s operations in the United States, as well as in Mexico, will be curtailed from Friday May 4 through June 4. During this period, CCIC North America will no longer perform the pre-shipment inspections of material bound for China or issue the final certificate required to clear customs.



The government has also cracked down on Canada, warning that any recyclers found to be processing US-origin material will face possible suspension of their license with the General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China (AQSIQ), sources said.



Collateral damage

US exporters have unanimously said their biggest concern at the moment is the fate of non-ferrous scrap containers that are currently on the water and heading toward China - but have not yet been issued a final CCIC certificate due to the time lapse inherent in the certification process.



“There are easily thousands of containers that have not been issued the CCIC certificates on the water, and this may cost exporters tens of millions of dollars if they are forced to have to resell the material,” a second exporter said.



In order for exporters to receive the final CCIC certificate, they must first receive an original bill of lading (OBL) from the shipping line. This process usually takes anywhere from seven to 15 days, and occurs only after the material is already en route to the destination.



“Every non-ferrous scrap container shipping to China out of all US ports in the last two to three weeks has received pre-approval but has not received the official CCIC certificate required to get into the country. This is the collateral damage of their action,“ a third exporter said.



“This is a big problem right now. We have containers on the water without CCIC certificates. All other companies are very concerned. We have been asking our colleagues how to handle this problem,” a fourth exporter said.



Diverting material

Faced with conflicting reports on whether or not material already of the water without certification will be rejected on arrival or be granted an exception, US and Chinese scrap market participants have been searching for additional information.



“Exporters are advised to consider their options and the risks therein, such as proceeding with sending the shipment to China or seeking an alternative destination other than China. Nevertheless, exporters are advised not to prepare shipments from the United States to China until the matter is resolved,” the Bureau of International Recycling (BIR) said.



The Institute for Scrap Recycling Industries (ISRI) echoed that warning in a release to members.



The groups are working closely together and with other counterpart organizations around the world to track and address this issue.



“We believe demand for American high-quality scrap remains strong worldwide… There are significant business opportunities for US exporters in other regions of the world worth exploring,” ISRI said.



But diverting containers is very costly, market participants noted, adding that scrap prices will now come under severe pressure in Southeast Asia if everyone reroutes their containers to that region.



“Diverting may cost anywhere from $2,000-10,000 per container. However, the problem is [that] all of [the] other markets cannot replace what China was buying,” a fifth exporter said.



Other exporters said that finding new markets has its own set of challenges, and it will take some time to make a transition.



“Only certain producers can clear customs from Malaysia to China. This is tricky and it is [a] very difficult and hard time to sell,” a sixth exporter said.



Reducing exposure

The uncertainty over whether or not CCIC North America will actually resume operations on June 4 has sent US and Chinese scrap market participants scrambling.



The lack of clarity has prompted most exporters to focus on reducing their overall exposure to prepare for the worst-case scenario. Many exporters have temporarily stopped buying material in the US domestic market and have begun holding shipments while they evaluate potential new markets where they might direct containers that are already on the water.



“We’re pulling everything that we can that’s not already on a ship. There are some hopes from Chinese consumers that the government will make an exception for stuff that has already been pre-approved and on the water, but there is too much uncertainty at the moment,” the third exporter said.



Other exporters said they are canceling orders from US suppliers until further details are made available and the impact to material on the water is better understood.



“We are trying to delay our shipments until after June 4 when CCIC will restart,” the sixth exporter said.



Others said it is a waiting game and noted that there is still time to react and find a solution due to the amount of time it takes a container to reach China.



“Containers take 25-35 days once shipped from the West Coast to [reach] China, or 35-40 days from the East Coast. Once containers arrive at the port, it is normal to have [up to a] 14-day detention,” the sixth exporter noted.





