Scrap recyclers who spent decades refining the export of red metal scrap to China now view the disruption caused by China’s sudden restrictions on imported scrap, and the unintended consequences that are emerging.

China is less direct in acknowledging difficulties following their controversial decision, but metals industry analysts are seeing negative consequences for China stemming from its import barriers.

Reuters says the import bans are a contributing factor in an unexpected global copper supply squeeze that has hit Asia hardest.

Inventory levels are low on the Shanghai Futures Exchange (SHFE), the London Metal Exchange (LME) and the Chicago-based COMEX market. While exchange pricing may not be booming, the signs are that physical premiums are rising.

Copper producers, sellers and buyers in Asia are still in the process of adapting to a combination of smelter outages and changing scrap dynamics.

Recycling Today report that. “China’s new restrictions on the purity of copper scrap imports caused a drop in the flow of material from the rest of the world, and the effect was compounded in August with the imposition of 25% tariffs on scrap from the United States.”

Most of the scrap imported into China had been used to make refined copper, so the scrap fed back into the refined metal balance very fast in China. Its disappearance is adding to the broader squeeze on availability of finished copper in the region.

Similar conclusions were reached by CRU Group, the London-based metals intelligence provider, who has suggested that copper producers in China were already stating their intentions to relocate some production offshore, to use lower cost labour to process nonferrous scrap, smelt the sorted material, and then export the pure copper and aluminum.

While such transfers are already occurring, with plants reopening in Malaysia, Thailand and other places, limits to the speed of capacity development and logistical/technical difficulties will raise the overall costs of using scrap as an input in China, when processing through these markets.” The CRU Group predicted.

China’s government has indicated that beyond the current tight scrap purity restrictions, they may ban all scrap imports by the end of 2020.

Analysts are sceptical pointing out that China imported 1.6 million metric tons of contained copper in scrap in 2017, suggesting that the gap is too big to fill without causing mayhem in the refined metal part of the supply chain.