July/August 1991
Despite intrinsic national differences, the worldwide scrap industry reports heard at the BIR’s recent convention in Monte Carlo showed remarkable similarities in concerns.
By Elise R. Browne and Si Wakesberg
Elise R. Browne is editor and Si Wakesberg is New York bureau chief for Scrap Processing and Recycling.
Every time you turned around at the Bureau international de la Recuperation's (BIR) (Brussels, Belgium) late-May convention in Monte Carlo, participants seemed to be discussing one of two gloomy topics: poor market conditions for nearly every scrap commodity in nearly every part of the world and the threats to international trade posed by the Basel Convention on the Control of Transboundary Movement of Hazardous and Other Wastes.
Beyond these dark clouds, however, some hope shined through. Markets in some regions (most notably the Pacific Rim) remain active and those in other areas could turn around during the second half of this year, some predicted. In addition, more than one governmental group has proposed excluding certain scrap materials from the Basel Convention's controls. The Basel Convention is an international accord calling for tight controls over international shipments of "hazardous and other wastes, " leaving each nation that has signed the agreement to determine how those "wastes" are defined and, thus, how the free trade of recyclables will be affected.
Basel Optimism
In the United States, reported Washington, D.C.-based attorney Julian H. Spirer at the meeting of the environment committee, a Bush-administration proposal to implement Basel would specifically exclude from the convention's controls scrap metals, paper, textiles, glass, and plastics that are separated from municipal solid waste.
Furthermore, he noted, although an alternative proposal by members of Congress calls for "far stricter controls on waste exports than either the administration's bill or even the Basel Convention would require," the alternative bill would provide an exception for nonhazardous scrap materials that are separated from solid waste before export and are intended for recycling.
Proposals from the European Economic Community (EEC) (Brussels, Belgium) and the Organization for Economic Cooperation and Development (OECD) (Paris) offer similar promise to exempt most recyclables from international shipping controls. Both organizations are leaning toward proposals to control "waste" movement through a system that divides "wastes" into three tiers of restrictions based on the material's hazardousness--and whether it is destined for recycling--according to representatives of the two groups. The EEC, recognizing recycling's "major" role in waste management, said Yann Grenet of that organization's waste management unit, win likely include on its "white" list of items to exclude from control most scrap metals, paper, textiles, and plastics. Some scrap metals, however, said Grenet, specifically mentioning lead, will probably be subject to stricter control.
The OECD is apt to place on its comparable "green-light" list of exempt-from-control materials a similar roster of nonhazardous items destined for recovery, said Marc Patten of the Business and Industry Advisory Committee (BIAC) to the OECD. Potentially hazardous materials being shipped for recycling, he added, would likely fall under an "amber-light" category of control calling for written contracts between the shipping and receiving nations. In either case, the shipper would be required to show that the materials were being sent for recovery, which could be proved, Patten said, by submission of a buy/sell agreement.
Compiling a list of potentially hazardous materials will be a difficult--if not impossible--task, he noted, explaining that the BIAC is recommending that the organization instead should assemble a catalogue of nonhazardous items. "I don't think we will ever agree on what's hazardous, but we could reach a consensus on what's nonhazardous," Patten concluded.
Ferrous Scrap: Hitting Highs and Lows
Although they were few, most of the positive market notes expressed at the convention were heard at the meeting of the ferrous division and shredder committee. While European steel scrap markets have generally showed a weakening trend, some countries--such as Spain and Italy--continue to be big importers of steel scrap, participants noted.
Even better news can be found in the Far East, said John Crabb, Simsmetal Ltd. (North Sydney, Australia), who noted that despite uncertainties created by the Gulf war, the weakness of Western economies, and increasingly tight monetary policies iii most Asian countries, "Steel production in the region, particularly from electric furnaces, has remained strong and scrap demand firm." Examining specific countries' demand, he reported that Taiwan increased its scrap imports to about 400,000 tons in the last quarter of 1990 and that Korea is also expected to enlarge its scrap imports. Furthermore, he said, Japan could increase its imports by a million tons during the year. In the first three months of 199 1, he noted, that nation imported approximately 300,000 tons of steel scrap.
Confirming many of Crabb's remarks, Osamu Yokota, Sumitomo Corp. UK Ltd. (London), reported that Japanese "scrap demand is continuously good," with 1990 consumption reaching 40.06 million metric tons. Nevertheless, he cautioned, the steel scrap market in Japan weakened in March because of higher domestic scrap generation.
While the Far East was reported as a bright spot, the scrap import situation in other parts of Asia-most strikingly India-might be considered bleak. Newly elected Ferrous Division Vice President Ikbal Nathani, Nathani Steel Ltd. (Bombay, India), described the general political and economic situation in India as one of "deep" problems. Three successive government changes in recent months have led to fiscal problems that inspired the current government to curtail imports, he said, by requiring all letters of credit to go through India's national bank, which requires huge fixed deposits in exchange. While these restrictions initially sent domestic scrap steel prices "sky-high," Nathani noted that they quickly dropped to a level far below that seen in years.
A scrap downtrend in the Americas was reported by Edward Hollander, Clarendon Ltd. (Glenview, Ill.), who suggested, however, that there is a light at the end of the tunnel. While there probably won't be any pickup in the North American steel scrap market until the fall, he said, many expect the second half of the year to be better than the first. In South America, however, he said, there is little anticipation of a pickup before the end of the year. A slump in the auto industry has been the major negative impact on the U.S. and Canadian steel markets, Hollander explained, noting that steel utilization, which was at 85 percent last year, is now down to 68 to 69 percent.
A Shifting Stainless Market?
U.S. stainless steel exports have experienced a dramatic change in pattern since 1988, a trend that is likely to continue, according to a presentation by Stainless Steel and Special Alloys Committee Chairman Barry Hunter, Keywell Corp. (Port Elizabeth, N.J.). Noting a shift in U.S. scrap exports from Europe--the major importer in 1998--to Asia--which now accounts for 90 percent of U.S. export demand--Hunter offered four primary explanations for this change: the strength of the U.S. stainless business, availability of Russian nickel, the rising value of the U.S. dollar, and expanding demand in Asia, particularly South Korea.
Within the United States, Hunter said, stainless scrap is tight, with supply barely meeting demand. A similar situation may be seen in much of Europe, according to a number of European representatives on the committee. Nevertheless, those representatives seemed to agree, while the stainless market in Europe had been, until recently, quite strong, a downtrend in demand--tied to a softening of the nickel market--is becoming apparent.
Examining the nickel market more closely, Ivor Kirman, Inco Europe Ltd. (London), pointed out that nickel inventories are extremely low-currently representing about six weeks' supply. Although no new major projects are scheduled to come online in the next two years and stainless production has been at record levels for the past year, he said, there are unknown variables that will affect the near-term outcome, such as which nickel operations might be disrupted; how much nickel the Soviet Union, Cuba, and China will release; and how much excess inventory currently exists in the stainless steel system.
Nonferrous Markets and the LME
Unfavorable economic factors--particularly in the automobile and construction industries--have spread throughout Europe, weakening the nonferrous metal markets, said Gianluigi Cattaneo, MetalEurop Commerciale Italia SpA (Milan, Italy), at the nonferrous metals division meeting. Cattaneo, serving as interim president of the division since the recent resignation of Michael C.E. Lion, Philipp and Lion Ltd. (London), also blamed industry difficulties on backwardation at the London Metal Exchange (LME), which he said had resulted in "costly consequences" for European metal dealers.
Responding to Cattaneo's remarks, the meeting's guest speaker, Martin Abbott of the LME, discussed why there had been a backwardation in copper and why he believes it will be self-destroying. He also insisted that the exchange exists as an important hedging medium that brings stability to metal trading.
The exchange hopes to extend new trading opportunities through its proposed secondary aluminum contract, which, he said, would offer to secondary aluminum traders "a price reference facility, a hedging facility, and a physical facility." While admitting that there is opposition to this proposed contract from some secondary industry members (particularly those in Japan), Abbott maintained that once these sources understand the LME's function in relation to secondary aluminum alloys, they will agree that the contract holds promise.
Basing many of his comments on LME trends, Nonferrous Division Vice President Larry Sax, J. Sax and Co. Inc. (Boston), reported that U.S. copper and aluminum prices have been falling, with export prices for aluminum still declining. Lead prices also have been off, Sax pointed out, noting that demand from battery manufacturers has been slow but is expected to increase by early fall. The bright spot in the U. S. nonferrous scrap industry has been zinc exports to Taiwan, he said, which have helped to increase market demand and firm prices.
The news was no more positive from Europe. In France, for instance, according to Division Vice President Gerard Le Gouvello de la Porte, Syndicat National des Metaux (Paris), "prices are low and there's been a competitive squeeze." Because demand has been off and stocks are high, he said, there's little optimism about improvements this year.
John Crabb, also a nonferrous division vice president, reported that Australia's nonferrous market mirrors that of the United States and Europe, with rising inventories, falling demand, and weakening prices. Compounding the situation, he said, has been a shortage of containers available for export. Discussing the Far Eastern markets, he said that tighter environmental controls in Japan, Taiwan, and Korea will continue to force plant upgrades in those regions and noted that Indonesia is the "growth market" of the future.
Paper Industries Oversupplied
Conditions evidently haven't been much better for nonmetallics. The chairman of the plastics roundtable, Hans-Joachim Brauer, Pav Papieraufbereitungs und Verarbeitungsges GMBH & Co. KG (Berlin), noted that prices for some scrap plastics in Germany rose toward the end of 1990, but this was an "artificial increase" caused by the Gulf war; prices for all scrap plastics have since "collapsed to rock-bottom levels," he said.
In the paper sector, many market problems seem to stem from an attempt by governments throughout the world to increase the recycling rate of the paper portion of the municipal waste steam without devoting similar attention to expanding markets. In Belgium, for instance, one attendee of the paper stock division observed, the paper reclamation rate has dropped since 1988, despite increased collection of scrap paper. Dealing with the problem of too much fiber, said Paper Stock Division Vice President William A. Nielsen, Nielsen & Nielsen Inc. (Pomona, Calif.), requires working with mills and through political channels to create more capacity. "The reality is," he said, "we can't change the American public's--or the European public's--desire to 'recycle.'"
Low prices created by fiber oversupply in other countries has hit U.K. exports hard, according to Division Vice President B. Gerry West, Severnside Waste Paper Ltd. (Cardiff, United Kingdom), who noted that “exports have declined significantly during the year due to cheaper products being shipped by the United States and Germany" to markets previously served by the United Kingdom. Cheerier news came from Austria, where, it was reported, lower grades have been quite strong in recent weeks, with sizable quantities being shipped to Eastern Europe.
All in all, summarized the new paper stock division president, Giampiero Magnaghi, Com Impex SpA (Rozzano, Italy), the industry is seeing some new mill openings along with a bit of market improvement, and should look forward to gradual additional improvements of markets over the next year. •
Despite intrinsic national differences, the worldwide scrap industry reports heard at the BIR’s recent convention in Monte Carlo showed remarkable similarities in concerns.