Though there are tremendous opportunities, the movement of the material across borders depends on the policies and regulations that are in place in various countries, which affect the markets in different ways. Ever since China introduced regulatory reforms and implemented its ban on scrap imports in 2018, followed by many other countries introducing a total or partial ban on specific commodities, recyclers have been trying to find new markets for these recyclables including scrap metals, paper and plastics. For instance, in the first week of March, India announced a ban on plastic scrap imports.
While these policy changes and regulatory reforms have posed challenges to the industry, in a way new opportunities are being created, particularly in the context of the Circular Economy model being encouraged across the globe. Leading industry experts share their views on the impact of regulatory reforms in different countries, the challenges and opportunities being created as a result of ongoing changes, in an interview with Swaliha Shanavas.
On the potential linkages between trade and circular economy, ISRI President Robin Wiener says, rather than thinking of a single long chain, the supply chain of scrap commodities in the global marketplace “weave and interlock together much like the loops of a knitted sweater”. Scrap is bought and sold based on the needs of the manufacturers and often commodities are traded to areas with the technology to consume them. Turkey, for instance, is a market economy that has the technology and capacity to produce many steel products, but does not have sufficient domestic ore or scrap to meet its steelmaking needs, she says.
“Such free and open trade ensures that valuable scrap is processed and reused, wherever it is in demand, rather than having it unnecessarily disposed.” Earlier, most countries were following the linear use and throw model and then gradually shifted to utilising the recyclable material by supplying it as raw material to various industries. Today, many nations across the world are shifting to a ‘green economy’, so large quantities of materials are being collected, but the challenge for most countries has been in dealing with the material being generated locally, says Ranjit Baxi, President, BIR and Chairman, J&H Sales.
The trend, he says, is to use more domestic material as a priority rather than importing the raw material. The world has started to develop the concept of Circular economy which has advanced over the past 10 years. While this model is absolutely essential, “trade cycles are such that goods find their home based on price and quality, and we believe that one should not create barriers to free and fair trade,” says Baxi. At present most circular economy models are regionalised. “This, I do not promote because if our mission is to create a sustainable future, we should be looking at the planet as one consuming block.”
On the regulatory challenges facing the recycling industry worldwide, one major challenge at all levels (not just international), is the lack of understanding by some policymakers of the distinction between recyclables and waste, as well as recycling and waste management, says Wiener. The regulations governing waste, particularly hazardous waste, are much stricter, and rightfully so, she says. As opposed to waste, recyclables are valuable commodities that are bought and sold because of a need for feedstock in manufacturing. If they are wrongly categorised as waste, regulations impacting transportation, processing, safety, and the environment start unnecessarily impacting the recycling industry and become a burden, ISRI President points out.
“We use the words “scrap”, “recyclables” or ”secondary materials” in the United States because they evoke the critical value of these materials in the manufacture of new products. The efforts of all of us at creating understanding that scrap commodities are recognised as just that – commodities – and not as waste are critical to ensuring that scrap remains the 1st link in the global manufacturing supply chain. “And it is critical to our industry’s future that our communities – and the governments that we operate under - understand who we are and what we do (and do not) in addition to the vital role our industry plays in domestic and global economies and in protecting the environment,” Wiener comments. Doug Kramer, President, Spectrum Alloys also holds a similar view. “The legitimate scrap recycling industry that ships real commodities is caught up in the promulgation of these rules because our industry is not well understood.
The utility and the importance of those materials in terms of reducing energy consumption, carbon footprint and cost are not well understood by governments. So I think that we are victims of the unintended consequence of bad public policy when it comes to what a lot of these nations are doing now in terms of trying to protect themselves.” They are not wrong in doing that, but part of that misunderstanding, in his view is that all the players involved refer to the commodities in a variety of ways – scrap, recyclables, commodities, etc., but also refer to the materials as ‘waste’. “And that is the worst mistake. It is not waste and never will be waste, he stresses, also stating that ISRI has for many years advised its members, the US government and different governments at the state level that scrap is not waste.
“Many parts of the US have legislated that scrap is not waste. We have to get the rest of the world to start referring to what we do globally as anything other than waste. And when that occurs, we begin to hopefully move towards solving the problem of having this legislated by unintended consequence and having the world embrace what we do as useful and appropriate.” In that same vein, Kramer says the industry cannot tolerate having participants that ship garbage overseas. “If they are shipping waste and calling it scrap, then we as an industry have to be outraged and we have to support governments stopping the shipment of waste.”
So, how are the current policy frameworks on achieving circular economy changing the game in waste recycling, and has the transition to a resource efficient economy impacted international trade flows?
ISRI is a major advocate of market-based movement of scrap commodities, says Wiener. “Policies that encourage recycling and the consumption of recycled materials are the most effective at promoting a strong and vibrant manufacturing supply chain that is economically and environmentally sustainable and that promotes innovation in recycling technology.” Recycling mandates in certain regions may promote recycling to a certain extent, but such regulatory burdens “can also stifle innovation and artificially disrupt the markets and thus the free flow of scrap commodities across borders,” she comments. Unilateral imposition by different countries in the world “smells of protectionism” and what people do not understand or appreciate is that all industries, wherever they may be based need a level playing field, says Baxi.
He believes markets will find their own level playing field. “Let us not try to manage this accessibility or market imbalances by imposing controls. By doing this, we are only shifting demand from one zone to the other, which does not benefit the region in any manner.” He fully supports the standpoint of the importing countries with regard to their demand for high quality materials that meet certain stringent quality standards.
Does this change bring in new opportunities and will it help different economies utilise the secondary raw material available locally and reduce carbon footprint?
“We can all work together to promote the economic and environmental benefits of using scrap commodities in the manufacturing process as a substitute for energy-intensive primary materials,” says Wiener. Growing such demand for recycled goods will create opportunities for more recycling and thus, even more benefits to the environment, she comments. While ISRI promotes growth in demand for scrap in domestic markets, the reality is that scrap moves across borders based on the demands and needs of industrial consumers worldwide. Those demands and needs vary and are based on a number of complicated factors, not simply volume availability, she states.
Manufacturing bases, costs, transportation issues, availability of resources, the types of processing facilities, labour markets, demand for particular grades of products, demand from competing markets, and other factors all affect the flow of material. “The U.S. itself is a perfect example of why “self-sufficiency” does not alone dictate the flow of material. On a pure volume basis, the U.S. is self-sufficient when it comes to most scrap commodities, however, each year we see more than $5 billion of scrap imported into the U.S. Why? Because open markets are the best arbiters of where scrap is bought and sold.” When markets are functioning properly, scrap commodities will find a home where they are needed most, which may or may not be local, Wiener notes.
In fact, she says it is not possible to capture the full environmental and economic impacts of recycling if recyclables cannot be traded globally. “I have always believed that necessity is the mother of invention. So in terms of trade, when one door closes, another door opens and people find new markets,” says Baxi. But the problem at present is that there aren’t sufficient infrastructure facilities to absorb the material, he notes. In the immediate short term, for instance, China’s action is impacting the recovered paper sector as the industry is trying to find replacement markets for 6-7 million tons of material that China may not absorb this year. But he believes in about a year’s time markets will settle down with suitable facilities coming up that could create fresh capacity.
In Kramer‘s view, this is an industry of opportunities. One should embrace free and fair trade and understand that materials will flow “to markets that make the most sense, that are the most profitable and are regionally sensible because transportation is an issue,” he emphasises. In certain circumstances on the one hand a country may seek to limit the amount of recyclables being imported or exported for purposes of protectionism. On the other hand, they may also not want to have consumers of scrap in their country because it is perceived to be dirty or environmentally unfriendly, which it is not, he underlines. “So I think it’s a double-edged sword. Does it present an opportunity for growth? Sure it does. Does it present an opportunity for countries to develop infrastructure to consume scrap? Sure it does.
That’s neither inexpensive nor particularly easy to do.” Kramer believes that irrespective of whether a country gives the opportunity for that to happen, scrap will always “seek the home that will make the most sense”. He is clearly not an advocate of protectionism and also not in favour of countries singularly being opposed to having what have traditionally been smokestack industries like the consumption of steelmaking, stainless making smelters being banned. “The consuming industry has the responsibility to consume clean material and do what they can to protect the air and be diligent about that; that’s part of EHS comprehensive responsibility. But I also think that they shouldn’t be regulated out blanket because the perception is that they are dirty. There is a need to regulate based on facts, and legitimate risk assessments need to be done.”