January/February 1993
At the BIR's fall meeting in Copenhagen, Denmark, recyclers shared common concerns about the global economy and other international issues that have been affecting various scrap commodities.
BY ELISE R. BROWNE
Elise R. Browne is editor of Scrap Processing and Recycling.
It's said that bad new travels in threes, but when it comes to the international scrap recycling industry these days, adversity seems to come in fours, fives, and sixes. Not only have recyclers had to contend with the worldwide economic recession—which they blame for a number of scrap market maladies—but many have had to do so while also facing a flood of metal exports from Eastern Europe, international proposals that pose new threats to scrap trade across national borders, wild European currency fluctuations, and various other business obstacles.
That was the backdrop for the Bureau International de la Recuperation's (BIR) (Brussels, Belgium) fall conference held in Copenhagen, Denmark, where the 400 or so delegates representing a range of commodities and countries offered some surprisingly similar assessments of how these factors have affected their markets. While they also reported some good news and positive predictions, this did little to brighten attendees' generally somber mood.
The Ongoing Eastern Bloc Oversupply Connection
One bit of bad news discussed at the meeting was the large quantity of nonferrous metal and scrap exported from Eastern Europe to the West, which has intensified scrap demand problems traced to the global economic recession.
How much has this situation hurt? The "huge supply of cheap raw material" from the former Eastern Bloc countries further reduced dwindling scrap consumption and prompted many of Europe's larger consuming mills to "all but pull out of the market" in the second half of 1992, said BIR Nonferrous Division Vice President Robert Voss of Voss International Ltd. (Harrow, Middlesex, United Kingdom). "In fact," he noted at the October conference, "it is not uncommon to offer material to major consumers and be quoted prices for delivery during the second quarter of 1993."
BIR delegates reported that Eastern European exports have affected the markets for aluminum, copper, nickel, and stainless steel, as well as cobalt, titanium, and other special metals frequently associated with military applications. As a result, Voss said, prices for the latter group of metals, in particular, have dropped "through the floor." A report by Sidney Greenberger of National Nickel Alloy Corp. (Pittsburgh) confirmed this assertion, noting that cobalt and cobalt alloys from Russia were said to be going for less than half the prices paid during early 1992.
Ferrous scrap shipments from the former Soviet republics, meanwhile, have been held in check by Russian regulations that limit export authority to a few companies and rising export duties in that country, said Edvard Voljansky of Promsyrioimport (Moscow). Thus, he reported, while Russia exported approximately 1 million metric tons (mt) of ferrous scrap in 1990, the figure dropped to about 100,000 mt in 1991 and, for 1992, wasn't expected to rise much beyond the 52,000 mt exported in the first half of the year.
Questions About Controls
Recyclers of all commodities have also been plagued by continuing confusion about the Basel Convention on the Control of Transboundary Movement of Hazardous and Other Wastes and the various related national and international measures that aim to control the movement of scrap and waste across national borders, conference reports revealed.
For instance, the "green/amber/red" control system enacted by the Organization for Economic Cooperation and Development (OECD) (Paris) seemed at first to many recyclers to be at least part of the answer to continued international trade since it provides for virtually unrestricted transfrontier shipments of most recyclables among the 24 OECD countries. But some of these countries, in their legislative negotiations on the European Community level, have challenged the OECD system, "insisting on their nationalistic right to determine which materials are allowed to enter their respective countries and under what conditions," noted Environment Committee Chairman Patrick Neenan of AMG Resources Ltd. (Harborne, Birmingham, United Kingdom). This not only has created what Neenan called "a fertile ground" for protectionist measures to masquerade as environmental controls, but also—thanks to a Belgian proposal calling for a tracking document to accompany all scrap and waste shipments—has caused recyclers to worry about the confidentiality of information about their scrap suppliers and consumers.
The international scrap recycling industry must speak with one voice in its opposition to such measures, advised Jack Bentley, a British official who chairs the OECD committee responsible for reviewing how materials are categorized within the OECD's three tiers of controls. In addition, he emphasized the need for the industry to present its case before proposals have been enacted, since repeals of established laws are unpopular with politicians. Industry adherance to standardized trading specifications, codes of conduct, and self-regulations could also help the industry's efforts to be heard with a sympathetic ear, Bentley suggested, pointing out that fear of "sham recycling" is behind many transboundary restrictions on recyclables.
Weak Is Strong?
Currency fluctuations—especially the dramatic devaluations thrust on some of the major Western European currencies during the fall—was another widely voiced concern at the Copenhagen conference. In fact, according to Robert Voss, the decline of currency rates affected European recyclers' day-to-day business "far more than the value of metal or even supply and demand."
For some, these effects were seen as beneficial. Paper Division Vice President B. Gerry West of Severnside Waste Paper (Whitechurch, Cardiff, United Kingdom), for one, noted that the forced devaluation of the pound was expected to help British paper recyclers—particularly exporters, who could use the opportunity to sell into markets previously out of profit's reach.
His countryman Austin Merrills of Ireland Alloys Ltd. (Hamilton, Scotland, United Kingdom), on the other hand, called the benefits of devaluation "questionable," and various delegates from other European nations complained that it had contributed to lower scrap prices and ever-thinning profit margins.
Evaluations of how falling European currency values have affected scrap exporters in other parts of the world were similarly mixed. In fact, BIR conference delegates offered differing views on the effects of the weak dollar seen prior to the European currency devaluations. On one side were those like Edward Hollander of Clarendon Ltd. (Glenview, Ill.), who noted that although the U.S. dollar had been "very weak" against other major currencies and should have made U.S. ferrous scrap attractively priced on the international market, "no matter how low the U.S. price went, European prices were lower." As a result, he said, for every cargo of U.S. scrap exported to places such asTurkey, another three were likely to be shipped from European scrap merchants.
In contrast, according to a report by Stainless Steel and Special Alloys Committee Chairman Barry Hunter of Keywell Corp. (Port Elizabeth, N.J.), as the dollar declined against world currencies in 1992's third quarter, opening foreign markets for U.S. stainless steel scrap, noncontainerized cargoes were shipped from the United States to Italy, the Netherlands, Belgium, and South Korea. Likewise, said Nonferrous Division Vice President John Crabb of Simsmetal Ltd. (North Sydney, Australia), the relative weakness of the Australian dollar during the year helped his country's exporters of ferrous and nonferrous scrap compete in Asian markets.
Market Pluses and Minuses
Of course, there was one thing that all BIR meeting attendees seemed to agree upon: The poor state of the world's economies continued to hit recycling markets with a slew of problems.
Paper recyclers miss profits. In the paper arena, the most common complaint attributed to the recession was lack of profitability. Government mandates have kept collection and consumption rates relatively high in many countries—with Germany, Denmark, Sweden, and the United States recording particularly strong rates, according to national market reports presented at the meeting—but prices haven't afforded recyclers much of a profit margin. In fact, in the Netherlands, said Paper Division Vice President Johan van der Zwaag of Parenco Oud Papier B.V. (Renkum, Netherlands), prices dropped so low that paper packers were forced to seek financial assistance for collection activities.
Plastic prices depressed. Like prices for secondary paper, those for scrap plastics have dropped—to levels so low that many recyclers around the world have abandoned this business. But unlike paper, which delegates forecast could see an upswing in values, secondary plastics were not expected to show higher prices anytime in the near future, said Plastics Roundtable Chairman Hans-Joachim Brauer of PAV GmbH & Co. (Berlin).
Supply and demand problems plague nonferrous markets. "The worst recession seen in Europe since the 1920s," as Robert Voss put it, has deteriorated the industrial sector throughout the world—a view supported by other delegates at the nonferrous division meeting. As a result, they said, most of the industrialized world has seen lower scrap consumption, dwindling demand for secondary ingot products, and weak prices for all metals.
Japanese imports have been among the most prominent casualties, reported Nonferrous Division Vice President Takahiko Kaitoh of Sumitomo Corp. (UK) Plc. (London), who pointed out that Japan's imports of both copper and aluminum scrap were off in August from the previous year by 26 and 25 percent, respectively. Imports of other metals also showed precipitous declines, he noted: copper cathode imports, 47 percent; aluminum ingot, 16 percent; zinc, 39 percent; and lead, a whopping 60 percent.
Other Asian nations have entered a recession as well, reducing the region's demand for scrap and intensifying competition, John Crabb observed. On a brighter note, he said, industrial activity in Hong Kong and China had been expanding at a "frenetic" pace, confirming his description of China as a country with "enormous potential."
Stainless pins hopes on the long term. The decline of the world's industrial sector also reduced world demand for many grades of stainless steel and alloy scrap and drove nickel prices lower, further narrowing profit margins. While these have certainly been pressing concerns for the industry, said Paolo Brach of Ferinox SA (Nanterre, France), "it's the lack of scrap that has really hurt."
More positive industry news was offered by Heinz H. Pariser of Heinz H. Pariser Alloy Metals & Steel Market Research (Xanten, Germany), who called stainless steel scrap "one of the fastest growing branches within the Western World's metallurgical industry." In fact, he pointed out, Western World availability of austenitic stainless scrap has more than doubled every 10 years in recent decades, and is expected to reach nearly 3 million mt by 1995. His price forecasts also offered hope—but not much for the near-term. London Metal Exchange cash nickel values should average $2.80 per pound in the first quarter of 1993 and $3 during the second quarter, rising to $3.50 and $3.80 averages in the year's last quarters, he predicted.
Ferrous recyclers look to EAF capacity increases. Eroding prices, declining scrap arisings, and reduced consumption have all squeezed the scrap iron and steel industry, according to reports from around the world presented at the ferrous division meeting. But, like the delegates at other commodity sessions, they also offered some hopeful market predictions. For instance, noted Ferrous Division President Anthony P. Bird of Bird Group Ltd. (Stratford-upon-Avon, Warwickshire, United Kingdom), a number of countries are set to increase their electric-arc-furnace (EAF) capacity in the next few years, which should expand world consumption of steel scrap. In addition, he noted, because scrap is "the most environmentally friendly furnace feed," it is expected to become more important to steelmakers seeking to control pollution.
Thus, although the clouds darkening the world scrap markets are far from dispersing, there are signs that they are at least turning from black to a shade of gray. As Bird concluded, "The best point about being on the rock bottom of the market is that it can only go one way," concluded Bird, "and that is upward."
At the BIR's fall meeting in Copenhagen, Denmark, recyclers shared common concerns about the global economy and other international issues that have been affecting various scrap commodities.