Back in January of 2017, AMM Chicago Shredded Scrap hit a low of around $265/GT, but then started to rally. For two years, the market maintained an upward trend, with AMM Chicago Shredded ending 2018 at $360/GT. Unfortunately, the rally ended when we rang in 2019 – during the first six months of this year the ferrous market erased two years of price gains!
What comes up must go down? All good things must come to an end? I’m not sure which adage best applies to ferrous market trends so far this year, but I’ll make a few comments regarding key factors driving the markets.
The U.S. economy is slowing. After achieving 2.9% growth in 2018, the economy is expected to slow further this year and during 2020. According to a recent GDP consensus forecast growth will slow from 2.5% in 2019 to less than 2.0% in 2020. As we all know, less economic activity equals less demand for scrap and less scrap generation, which ultimately reduces happiness for scrap processors.
Another significant factor driving lower pricing this year has been the drop in export demand for U.S. ferrous scrap, which was off 6.8%, during January-May of this year, of note demand from Mexico dropped 39.8%, Taiwan was down 15%, India was off 39%, and Turkey dropped 8.8%. Slowing global economic growth is the main driver of the reduction in international demand, and not forecast to improve significantly during the next year.
Has the market now bottomed, as has been reported in the press by experts and key industry leaders? As Yogi Berra said, “It's tough to make predictions, especially about the future.” But I do believe that while business conditions are not as positive as they were during 2018, strategically focused and fiscally responsible recycling businesses will continue to thrive during the coming year.
Strategy and finances were on center stage during ISRI’s Board Meeting in D.C. last month, which focused on a discussion about the future of ISRI. The fact that ISRI’s Executive Committee was willing to take the time the time to hear the unfiltered voices of so many of ISRI’s membership speaks volumes about the strength of our organization and is reason to be confident that ReMA will continue to be the most influential recycling industry trade association for the commodities it serves. A few key themes and take-aways for me were: invest in the future, be inclusive of complimentary commodities (metals and non-metallics), improve fiscal responsibility, increase accountability and follow up on the deliverables of various initiatives, prioritize government advocacy and networking, and last, but not least, ReMA is generally doing great because of our strong leadership, competent and hard-working staff, and engaged members!
There is every reason to be excited about the future of recycling industry and ISRI. July’s Board Meeting is proof that ReMA wants to hear your voice and engage your talent. I hope to see you at a future meeting!
Brian Halloran
ISRI Ferrous Division Chair