n° 166 – May 2020

The South East Asian scrap processing industry is facing all of the same issues as are being felt globally: lack of available scrap as collection chains in supplier countries are now restricting shipments; reduced capacity owing to countrywide lockdowns; and tightened liquidity.

Typical trade flows were already badly disrupted by the first wave of the Coronavirus; at present, South East Asia is far from containing the virus as a second wave of infections seems to have emerged. The generally weaker public health system, crowded cities and delayed responses by governments to limit travel between neighboring countries have all contributed to further outbreaks.

While trade flows will certainly be disrupted again if a second wave spreads, interest in buying scrap has intensified in the past two to three weeks. Secondary grades of aluminium and copper-bearing scrap have been in greater demand within the region. This increased interest is likely to be due to higher demand from China and the reopening of industries within the region. 

The Coronavirus outbreak will have a profound impact on the emerging South East Asian economies. The International Monetary Fund (IMF) is projecting that the ASEAN-5 economies of Indonesia, Malaysia, the Philippines, Thailand and Vietnam will see a contraction of 0.6% in 2020 rather than the 4.8% growth predicted earlier. Despite the increasingly pessimistic forecasts for the region, both the IMF and the Asian Development Bank (ADB) are projecting a strong rebound in 2021: the former anticipates growth for the ASEAN-5 of 7.8% while the ADB sees growth in South East Asia reaching 4.7% next year.

Looking forward, the reaction of South East Asian markets will depend to a large extent on how quickly the international economies of the USA, mainland Europe and China rebound and how rapidly these countries and their governments respond to any resurgence of COVID-19.