China, Indonesia, Malaysia Key Players in Trade

Some recent decisions by Asian governments regarding the import of scrap aluminum may signal positive signs for the U.S. scrap metal recycling industry. The Asian market is not without some hurdles, however.

While prior to 2013, China was perhaps the world’s largest importer of scrap aluminum. That government’s increased restrictions on aluminum imports in recent years have had a negative effect on the industry here at home. However, because those in China who are involved in secondary metals are not state-owned companies but rather entrepreneurs, they’ve found ways to skirt around China’s draconian restrictions on imports. Many have found ways to (re)establish their businesses in place such as Malaysia and Indonesia. Hence recent decisions by the Indonesian and Malaysian governments point to a positive impact on the importation of U.S. scrap metals according to the Institute of Scrap Recycling Industries (ISRI).

In Indonesia for example the government has delayed its decision to reduce the impurities threshold of imported scrap aluminum. By 2021 the allowable level of impurities was supposed to be lowered to 0.5%. However, after negotiations with the ISRI (aided by the U.S. government) Indonesia is allowing a 2% level of impurities at this time. This decision gives U.S. scrap metal dealers some extra breathing room and fewer restrictions on exports for the time being.

Scrap for Asian secondary metals market
Scrap for Asian secondary metals market

Similarly negotiations continue in Malaysia regarding impurity levels in secondary metals. Following China’s 2020 imposition of restrictions, Malaysia became one of the world’s biggest importers and producers of secondary metals. In fact Malaysia imported 418,000 metric tons of secondary metals last year while China imported only 145,000 metric tons.

U.S. scrap metal recyclers are still waiting to see what the ultimate decision of the Malaysian government will be since in March that government hinted that increased restrictions on impurity levels may be in the offing. The ISRI says it has information that Malaysia may require a 0.25% level of non-metallic objects in imported secondary metals. That would be a blow to U.S. metal exporters since it would ostensibly prohibit the export of coated wires. If the Malaysian decision becomes reality it could force some secondary metals businesses to move out of Malaysia just as they moved out of China in order to preserve profit margins.

China’s restrictions take their toll on U.S. scrap metal recycling companies

Nervous American scrap metal companies are taking a wait and see approach. For now, however, the Asian secondary metals market remains fairly robust and the need for scrap metals, copper especially, continues to be high. Time will tell what is in store for U.S. metal recycling centers.