The recycling industry is one of the major contributors to economic growth globally, and the cross-border trade of recyclable materials, often referred to as ‘waste’, has seen a remarkable growth over the years, with recyclable materials including scrap metals, paper and plastics being transported across the world. Though there are potential opportunities, ‘waste’ has a very different connotation in different countries and the movement of these recyclables across borders depends on the regulations pertaining to individual countries, thus affecting the trade in various ways. The recycling industry has been an advocate of free movement of goods internationally and has been working towards this goal for many years now. 

Swaliha Shanavas speaks to industry experts to find out the current situation with regard to import and export of scrap metals with specific focus on emerging markets, and the opportunities and possible solutions to help improve resource efficiency while reducing environmental impacts. Opportunities in scrap metal trade  There are ample opportunities at the international level for industry organisations to work closely together and collaborate on enhancing relationships between suppliers and elevating international approved standards across borders, says Nasser Aboura, Managing Partner, Aboura Metals. “The international scrap metal market is diverse, which is an advantage for traders as they have access to many regions; for instance, demand increases in India when China faces a slowdown.” Aluminium and copper are the most traded metals “as they are the most integrated in most industries and our daily lives” he notes. But there are challenges and trading with other countries depends on the agreements existing between the countries and “some regions have laws, bans or high tariffs that make it difficult to trade these scrap metals,” says Aboura.

“In our region, infrastructure growth and development has contributed to more generation of post-consumer scrap materials which resulted in more scrap volume generation. But for recyclers, every opportunity is not without a challenge,” says Engr. Salam Sharif, Chairman, Sharif Group; President, BMR & BIR Chairman of the Ambassadors Committee. Sanjay Mehta, Director, MTC Group and MRAI President has a different view: “Frankly speaking, there are no major opportunities in the international scrap metals market as business volumes have come down by more than 40% and people are not generating enough sales to cover their routine expenses.”

Muzammil Haji Amin, President of ALA Group and Founder & Executive Member of BMR, says the demand for metals has increased dramatically in the last century due to economic growth, which has put pressure on natural resources. There is also an increased awareness of environmental degradation, which is why there is a movement for transformation towards green technologies. Therefore recycling plays an important role as rapid industrialisation does not have to depend completely on exploiting natural resources. This results in more demand and opportunities in the international metals scrap market which is already worth over US$500 billion.

It employs around two million people and handles 600 million tonnes of waste annually. This industry is a priority area for any country’s socioeconomic growth.”  Further, great opportunities exist in waste electronic and electrical equipment (WEEE) as a recycling source as this contains many metals which are high in demand, he says. “The global demand for steel scrap has also spiralled over the past couple of years. It is predicted that the demand will escalate further due to increased steel production in countries such as India, China, Brazil and Turkey, so steel scrap offers many opportunities.”

Export & import regulations and key challenges

Regulations vary from country to country and waste and scrap metals have to be treated and processed as per the law in each country says Aboura. For example, the export of Steel scrap is banned in Saudi Arabia, while in others there is no ban. “Another ban in our region is exporting Copper scrap in Kuwait. This affects the volumes traded and exported, but on the other hand it increases competition and improves quality and local trading.” Some of the major barriers the Middle East recycling industry faces are the continuous and sudden regulations from governments, Aboura states. “For instance, bureaucracy structures which require extensive paper work, higher custom duties and inconsistent regulations result in shipment delays. Some of these regulations may be specific to changes in delivery packaging.

We faced a major hold on shipments to India in June 2015 due to similar changes in regulations. This slowed down businesses in the Middle East because India is a major buyer for this region,” he explains. Apart from commodity prices “which will continue to be under pressure in the foreseeable future” recyclers face laws and regulations challenges from the countries they’re dealing with, says Sharif. “Recyclable materials are often classified as “waste” and each country follows its own waste regulation and management, i.e. recycling, treatment and disposal. These recyclable materials are under strict movement control; import/export tariffs, commodity licensing/certification, inspection and quarantine are some of the major challenges recyclers face.” 

Many countries have highly imposed restrictions on exports of scrap commodities which include export prohibitions, quotas, taxes, and various administrative measures, notes BMR President. In the Middle East, commodities like battery scrap, lead plates, lead oxide, rains, reels, rubber tubes, etc. are not allowed to be imported due to the nature of cargo; while lead battery scrap can only be exported with a permit obtained from the Ministry of Environment. “In the UAE, imports from 14 origins, i.e. Sudan, Egypt, Syria, Iran, Iraq, Yemen, Somalia, Libya, Afghanistan, Pakistan, etc. are banned; import for re-export (to save the duty) of scrap commodities is no longer allowed in the emirates. Export of HMS/Stainless Steel is not allowed due to local consumption requirements,” he emphasises. In Sharif’s view, “The prevailing extremely difficult market conditions coupled with regulatory hurdles have led the scrap metal import/export sector to be reeling under margin pressure and low scrap availability. 

The region imposes export taxes and overseas government restrictions aimed at preventing the import of hazardous waste.” Amin believes the recycling industry “is not widely understood and is subject to biased laws and regulations in many countries that restrict the movement of scrap. More than 40 countries impede/ban scrap exports, directly or indirectly, to protect domestic scrap markets, which do not really exist.” There are many challenges related to exporting material globally, such as laws and regulations prevailing in the buying countries, their system of material clearance, various types of documentation required, inspection procedures, payment terms etc., says Mehta. “Amongst these, huge volatility in the market is the main challenge recyclers are facing.”

Impact of regulations in India, China and other key markets

India’s metal recycling industry is facing many issues, as MRAI President enumerates: Import duty on metal scrap ranging from 2.5 - 5% and 4% SAD (Special Additional Duty) levied on metal scrap imports, “which needs to be abolished”; FTA (Free trade agreements) with ASEAN countries, “which affects Indian metal recyclers”; PSIC issues – “which adds up landed cost of scrap imports, affecting the trade”; Inconsistent method of valuation of scrap by Customs; Clearance of scrap at all Ports – certain grades of scrap are not allowed to clear at all Ports. “All kinds of metal scrap should be allowed to be cleared at all ports”; Shipping Lines issues – “various exorbitant charges levied by shipping lines on scrap importers, and to deal with this issue, proper Shipping Practice Bill to be introduced by the Ministry of Shipping”; Absence of proper regulatory body for controlling shipping line operations; Industry status still not granted for metal recycling activities – “metal recycling trade (secondary metal sector) shall be granted industry status by the government.”

Most scrap material leaving the Middle East is generally collected in Dubai for export to southern and eastern Asia, with India and China being the biggest consumers. “Imports are now allowed only through ports notified by the authorities and all scrap coming into the country will have to have pershipment inspection certificates,” Sharif stresses. China, which is now the third largest importing and exporting country in general commodities and first in scrap metals import and export, continues to be the key driver of import growth among developing countries, states Sharif.

In the Middle East, China has strengthened its strategic economic relations by establishing cooperation forums and business councils to secure its access to primary goods and consolidate its export markets and “India will offer plenty of opportunities with the opening up of its economy, especially for investors from GCC countries,” he opines. India and China are the biggest buyers and are considered home for Middle East scrap and for many years both countries have introduced new regulations and measures, notes Aboura citing the Green Fence in China, CCIC inspection certificate which is a must for some of the Chinese ports and the PSIC certificate required for every scrap shipment into India. “These have caused some disruption at times, but Middle Eastern suppliers and exporters managed at all times to accommodate these introductions,” he comments.

Though Ala Group President agrees that India and China are the biggest consumers of metal scrap from the Middle East, he says both countries have implemented various measures including export quotas, taxes and licensing requirements in order to protect domestic producers, and “such trade barriers have adversely impacted” the Middle East recycling sector. “China’s restrictions on imports have added to congestion in the Middle East. Its overseas suppliers have to apply for an export permit, for instance, which slows down exports to the country. In India, other countries export finished goods on zero duty, but there is duty on scrap.

This is a major factor affecting the Middle East recycling sector,” Amin comments. He expresses that “current foreign trade barriers distort international trade and are detrimental to the growth of the recycling industry. Countries such as Russia, Ukraine and South Africa place limitations on scrap, but not on finished products made from scrap.” Again, import barriers such as tariff charges and customs regulations have been imposed by several countries on steel scrap in order to protect local manufacturers and “while steel producers in such countries benefit immensely from these barriers, it damages global trade”. Despite the difficulties, Mehta highlights the international business potential of the two countries: “In my view China is the top importer of metal scrap, except ferrous scrap. Globally it is now considered that India will become the second largest buyer in the near future, so there is great potential for international recyclers to do more business with India.”

Role of recycling associations in promoting free trade

Recycling associations are established to promote free trade and promote the fact that our commodities are not ‘waste’ as often referred to, but vital raw material to the industry, comments Sharif, adding that in facilitating global trade and protecting the environment, “recycling associations like BIR, ISRI, CMRA, BMR, MRAI join hands in providing a vibrant forum to establish effective business relations and to uphold recycling among other industrial sectors and policy makers.” The industry has been able to influence government decisions in recent years “with the BMR acting as a platform that can serve the region’s scrap suppliers and exporters to bring up any issue before the governments or customs as we saw during 2015 (India’s June PSIC), where BMR and other associations worked hard to clarify and solve the matter with the government,” Aboura highlights. MRAI has been successful with the government in terms of making their presence felt, Mehta underlines.

“It took almost four years for the Indian Government to understand there is a metal recycling association in India and the huge potential in this sector. We are now confident that some improvement will be seen regarding issues raised by us. A study has been done on ferrous scrap generation in India by Joint Plant Committee (Steel Ministry). A similar study is now being done on all types and sources of metal scrap generation in India by KPMG, and MRAI is one of the Committee members along with Steel Ministry and MSTC. Based on these studies, the Government of India will formulate a Metal Recycling Policy in three months’ time. Once the Recycling Policy is in place, we hope many of the metal recycling industries’ problems will be resolved.” BIR and MRAI share “good relations” on global platforms and in the last four years BIR has been supporting MRAI on trade issues and sharing their views and knowledge to resolve these issues, he says. “They can play a more important role in the near future in the formulation of the Metal Recycling Policy by the Indian government.”

Recycling associations definitely play a very important role in terms of liaison with the government and policy makers, says Amin. While BIR, which is acknowledged by international bodies and governments, has called on governments globally to put an end to trade barriers on scrap, BMR, which has brought all suppliers and traders of the Middle East recycling industry on one platform, is also “doing its best to make people and policy makers aware of the industry and its importance in protecting the environment,” he remarks. “MRAI recently began a discussion with the Indian government to streamline pre-shipment inspection procedures, removing inconsistencies in customs and evaluation of pricing in scrap imports.”

Regulatory challenges – Used vehicles and ELVs

Looking at the issue from the used vehicle/ end-of-life vehicle (ELV) perspective, Carlos Sabugueiro, CEO, Middle East & Africa, Copart says Dubai has been operating as the GCC hub of this trade for many years now. “It is the place where the majority of used vehicles are imported to, either to be scrapped, dismantled or repaired. The parts and repaired vehicles are then sold on locally or re-exported across the region to places such as Africa, the sub-continent and the former Soviet republics. It is fairly straightforward to import and export vehicles from the UAE, as long as the import and export papers are in order and the duties are paid.” Legislation differs from one GCC member country to the other. In Saudi, for instance, there is a ban on the import of all salvage vehicles and used cars above certain engine sizes (5.2L) and it only allows the export of vehicles that are roadworthy, while Oman allows the import of vehicles up to 5 years old and export of any vehicle, Sabugueiro notes adding that Bahrain has stopped the import of any salvage completely.

“Europe accepts imports for the majority of ELVs, but they can only be registered again if they are repaired and modified to European standards (CO2 emissions), so it is quite highly regulated. Countries such as India, China or Brazil, where Copart also operates, have stringent regulations on import and export, as well as very high taxes that make it mainly financially unviable,” he underlines. In his view, for any business related to trading in ELVs, the challenge is “to keep up with the constant changes in regulations” affecting the sales, import and export of ELVs. “Moreover, a lack of regulation around sales practices and potential corruption causes us significant challenges.” Trying to obtain clarity of data and a standard market practice is difficult, he says, meaning “buyers are able to create strongholds on buying activity, resulting in an unfair marketplace for many through their control”.

Also, having standard policies around import/export of vehicles across the GCC can be very tough to manage as their buyers become frustrated when something that was done a week ago for a certain type of vehicle is no longer accepted the following week for a similar transaction, Sabugueiro explains. As a shipper and trade facilitator they comply with all regulations related to the ownership of vehicles and transfer of fund, and “no vehicles are sold or shipped without access to “clean genuine” ownership documentation”, he states. The management of ELVs is an increasingly important issue throughout the GCC and through auctions a large percentage of damaged vehicles are sold through Copart to businesses or individuals that specialise in recycling various parts, he adds.

“As a trade and logistics facilitator, Copart Middle East is part of the value chain, however, we have limited to no control on the equipment that gets transferred to the wider Middle East and North/East Africa. While a lot of vehicles (Commercial and Light Vehicles) are sold to these regions to be repaired, a fair percentage of the inventory shipped via us is recycled for parts and the rest is scrapped in the unregulated markets.” Sabugueiro says the company would be interested to participate in an industry wide regional/cross border initiative overseen by the authorities to track the vehicle that is scrapped and offer a service to recycle the unused parts of the vehicles. “We are already working closely with ESMA around the rules to be introduced to regulate certain types of damaged vehicles coming into the UAE from the USA for local registration. This shows the important market position we hold as we are managing the sale of the majority of salvage across the USA.”