The recently introduced export barriers for stainless steel scrap in South Africa indicate that the trend could continue towards more protectionism in the scrap markets, says Germany-based Centre for European Economic Research (ZEW).

Already, since 2002, an increase in export restrictions was observed for many raw materials, parallel to considerably increased raw material prices. Export restrictions for scrap were also discussed in the past in the European Union (EU). Among the countries that restrict the export of the main components of stainless steel, China is at the top.

Besides China, Indonesia and Russia are the key markets for the primary raw material – nickel.

Further, Zimbabwe and India restrict the export of chromium.

According to a study by the Technical University of Berlin in 2012, chromium surprisingly has the most critical supply security among all the main components of stainless steel.

“Through export restrictions, individual countries or interest groups can gain economic advantages within these countries. The costs are borne by third parties. Export restrictions are thus generally harmful in most of the cases,” says Germany-based University of Heidelberg professor of environmental economics Timo Goeschl.

“Instead of discussing possible export restrictions, Germany and Europe should focus on trade agreements as well as on the more efficient use of raw materials, such recycling. The latter contributes to sustainable handling of scarce resources,” adds ZEW researcher Frank Pothen.

Europe, which cannot cover its own requirement with its scrap production, depends on imports from all over the world. “The ZEW study again shows how important free trade is, especially for the stainless steel scrap market,” says Pothen.

The discussion about possible export restrictions in the EU is rather counterproductive in terms of open markets and the supply security of the European stainless steel industry. The ZEW study also underlines the importance of high recycling rates and efficient use of raw materials, he adds.

“More open scrap markets and an even higher use of scrap in the production of new stainless steel contribute to this. This would not only reduce the consumption of primary raw materials, but also have positive effects on the environmental balance, as shown by engineering company Fraunhofer Umsicht,” says steel company Oryx Stainless executive board member Roland Mauss.

As net importer of the main components of stainless steel, open markets are in Europe’s interest. Cutting off its own market through trade barriers, with the aim of an increased supply security, is not an alternative, says Mauss.

This conclusion was drawn by the study, which highlighted the strategic trade policy and its effects on the stainless steel industry.

Professor Andreas Löschel, Goeschl and Pothen have examined, from an economic point of view, the reasons for and the effects and scope of trade restrictions for the main components of stainless steel: nickel, chromium, molyb- denum and stainless steel scrap.

Further, the ZEW experts derived policy recommendations for the EU. To secure the raw material supply of the stainless steel industry, the EU should waive its own import duties and make the international trade restrictions and their effects on the markets transparent, says Pothen.

It would be essential to open the markets for trade in nickel, chromium, molybdenum and stainless steel scrap further, through the World Trade Organisation and within the scope of bilateral trade agreements, he adds.

There are trade barriers and export restrictions in more than 30 countries or stainless steel scrap, which accounts for about 60% of the raw material requirement for stainless steel production in Europe.

However, these export restrictions mostly do not affect Europe’s supply of this raw mate- rial, as, with the exception of China, India and Russia, scrap laws are enforced almost exclusively in countries without internationally significant scrap production.