China 25 percent tariff on scrap aluminum hits US recycling industry

Global Business

Scrap commodities are one of the few industries where the U.S. runs a trade surplus with China, but it could be impacted hard by new tariffs on aluminum scrap.

CGTN’s Hendrik Sybrandy reports.

Brian Henesey is a rolling billboard for recycling. Take a tour of Rocky Mountain Recycling, which he runs, and you’ll see huge mounds of aluminum scrap, one of the materials that leaves this yard bound for customers around the world.

“At the end of the day, recycling old stuff keeps it out of the landfills,” Henesey said. “You don’t have to mine virgin, don’t have the greenhouse gas.”

More than half of the material is exported. And, according to the Institute of Scrap Recycling Industries, the industry trade group, more than half of the U.S. aluminum scrap sent overseas last year, $1.1 billion worth, went to China.

“It’s a global consumer,” Henesey said. “One of the largest consumers of recycling material in the world.”

On April 2, China retaliated against U.S. tariffs placed on steel and aluminum, and placed a 25 percent tariff on U.S. aluminum scrap. That’s left many in the industry quite concerned.

“Extremely,” the Institute of Scrap Recycling Industries’ Joe Pickard said. “The scrap industry right now unfortunately is kind of caught in the middle in some of these trade disputes that we’re currently seeing.”

Pickard said the tariff will cause some Chinese manufacturers of cars, beverages and other products to use primary or new aluminum instead, which he says is 90 percent more energy-intensive.

“When you impose trade barriers, that can disincentivize recycling and unfortunately more material can be sent to landfill and that’s the last thing we want to see,” he said.

Pickard predicted the tariff will force many Chinese scrap buyers to look for other suppliers, and U.S. suppliers to hunt for new markets, bringing a period of uncertainty, which he said the industry doesn’t like.

“It can affect price, it can affect destination, it can affect material flow,” Henesey said.

More than a half a million people in the U.S. work in the scrap recycling industry, directly or indirectly. Some of those jobs could be affected by what began as a U.S. move to re-balance trade between the two countries. Official U.S. figures put the trade deficit with China at 375 billion dollars, though President Trump sometimes inflates the figure.

“We have a trade deficit, depending on the way you calculate, of $504 billion,” Trump said recently.

Which is ironic, Pickard pointed out.

“Scrap commodities are actually one of the few industries where we run a trade surplus with China,” he said.

Meantime, Henesey, who prefers free and fair trade, is adopting a wait and see approach.

“We all hope and wish that we don’t have anything that goes forward that would be negative,” he said. “What’s going to come out of this I don’t have an opinion because it’s akin to predicting the weather.”

Given the current U.S.-China trade dispute, forecasting the fate of aluminum scrap could be similarly challenging.