Scrapping the Iron Curtain 

What’s in Store for Recyclers

As Eastern Europe gropes for economic stability in its new position, European Community members assess future scrap markets with optimism, while U.S. scrap exporters view a united Europe with a mixture of hope and caution.

“It appears as if the uniting of the two Germanys may be the first major change we will see in the new European economic relationship, and the first to have some impact on Western Europe,” says one German metal executive. One major step was taken in that direction on July 1, when East German currency could be traded one-to-one for West German marks, giving East Germany “an opportunity to get its hands on real money,” adds this official.

Money, or perhaps more appropriate, “credit,” likely will be the big problem when it comes to trading with many of these Eastern Bloc countries, which simply don'’ have the financial resources needed to move their economies out of their present morass. Says one European metal official, “It’s obvious that we will have to invest large sums of money in order to get things started.” Already there’s been talk of a vast “Marshall Plan” to help East European countries rebuild their broken-down economies. A recent meeting of the Parliamentary Assembly Council of Europe proposed a target of $400 billion for this purpose.

One of the questions being asked is whether the Soviet Union, already facing critical economic challenges, will have to sell off more gold, nickel, and other metals in exchange for cash. Others question whether some of the satellite countries possessing some raw materials also will be forced to dispose of their supplies in order to secure finances to purchase the products they need.

East and West German Ventures

It has been reported that Krupp and Thyssen, two West German companies, already have entered or are about to enter into joint ventures with East German companies: Krupp is said to be investing in the rebuilding of steel and special alloy works; Thyssen is said to be planning to provide assistance in restructuring East German steel production. Published reports indicate that Metallgesellschaft AG, of West Germany, which has had some experience in trading with East Germany, is slating considerable financial outlay for investment in East Germany. The company's chairman, Heinz Schimmelbach, was quoted recently as saying, "There is substantial competition in the Eastern European Bloc, [which is] a big market with a huge backlog of demand. It's a magnet for everybody who has something to offer."

Similar sentiment exists in the United States. "A united Germany will be particularly strong in the East European market, " explains a U.S. scrap executive who exports to that country.

West Germany showed a continued expanding role in the European aluminum market in 1989, according to the West German Aluminum Industry Association. Aluminum consumption rose by 6 percent in 1989 compared with 1988, reaching approximately 2 million metric tons (mt). Secondary aluminum production was 537,000 mt, up 1.3 percent and a new record. In the first quarter of 1990, West Germany imported from the United States 6,400 mt of copper scrap and 3,400 mt of aluminum scrap.

Eastern Bloc As EC Member?

The effect on the EC of the events m the Eastern Bloc countries is already apparent, according to such observers as Francis Veys, general secretary of the Bureau International de la Recuperation (BIR), Brussels, Belgium, who says that some Eastern European countries have had contact with the EC and are seeking to attain membership status in that organization.

The opposite effect may hit BIR, which traditionally has included a number of Eastern Bloc scrap organizations as members. However, Veys notes that the quick changeover from state-subsidized and -controlled organizations into freer agencies has caused some dislocations. Czechoslovakia, he says, has had to lapse its BIR membership until it can find a new scrap business membership basis.

On the plus side in Czechoslovakia, Heinz Pariser, of Heinz H. Pariser Alloy Metals & Steel, West Germany, is conducting a special steel conference in Prague, Czechoslovakia, this month that will include talks on stainless steel scrap.

Absorption of Eastern Bloc countries into the EC, however, will not be easy. Renato Ruggiero, Italy's trade minister who began a six-month term in July as chairman of the EC Council of Ministers for International Trade Issues, says that "the unique political and economic status of former Soviet satellite countries will prevent, at least initially, normal membership in the European Community." A “special arrangement,” he said, will have to be evolved.

Will these satellite countries be asked to supply the needs of the Soviet Union first, before they can trade with Western Europe? No one seems to know for certain how the flow of metals or scrap will develop, although some observers believe that attempts are already under way m countries such as Hungary and Poland to establish trade patterns with the West.

On the demand side, Michael Steel, market research manager for Johnson Matthey, London, in a recent interview with the Journal of Commerce, said that the opening up of Eastern Europe could mean increases in platinum demand by at least 500,000 troy ounces in the next few years.

U.S. Opportunities and Inopportunities

If one examines the ferrous and nonferrous U.S. scrap export statistics for the first quarter of 1990, not a single East European country appears on the list as an importer of U.S. scrap. Industry members believe, however, that U.S. scrap has moved to some of these countries through shipments from other importing nations. "Until the political situation settles down," says one U.S. scrap shipper, pointing to what has been taking place in Romania, “we don't know what the outcome will be and I doubt if many exporters will commit material to these countries.”

What will be the outcome when things do settle down? "It could present a big competitive problem for U.S. scrap exporters if Western Europe monopolizes the Eastern European trade," predicts one East Coast shipper. Others point to the possibility of a strengthened and united Europe "moving scrap not only on the European continent, but also, via Rotterdam, to as far as China."

One impact resulting from the vast changes in Europe is malting itself felt in the nickel industry. It has been widely reported that talks have been going on between the United States and the Soviet Union to end the ban on imports of Soviet nickel, which has been in effect for the past six years. The ban was originally imposed because it was believed that Soviet nickel contained percentages of Cuban nickel. If the ban is lifted, and some observers think it will be this year, Soviet nickel may soon be flowing into the United States.

There's little doubt that the concept of a "Fortress Europe” sobers U.S. businessmen, including steel producers, copper and brass product producers, aluminum shippers, and scrap sellers. Earlier this year, the U.S. International Trade Commission issued a report that lists the measures taken by EC governments to bring about freer trade with one another by 1992. "Since the United States is outside the European Community," the report explains, "measures that reduce internal barriers but leave external barriers unchanged cause trade diversion, that is, trade among EC member states at the expense of trade between the United States and the European Community."

In the past, there have been protests from U.S. copper product manufacturers about "level playing fields." Now, U.S. aluminum executives are expressing similar concerns. In May, Paul Drack, of Alumax Inc., Norcross, Georgia, and chairman of the Aluminum Association, was quoted as saying, "We put tremendous effort in letting our trade negotiators know that we are prepared to compete anywhere without special treatment if they just get us a level playing field. You'll notice that since our trade mission to Europe last year, comments in the press by U.S. @e negotiators often include a reference to aluminum."

There is also the opinion that expanding needs in East Europe for new infrastructure will require tonnages of metals and scrap. BIR's Veys anticipates "a need for scrap in most of these countries ... but there will be a problem in payment because of their lack of financial stability. They will need a huge amount of aid, and some of it may have to come from the United States." Adds a U.S. metal official: "In the long run, U.S. companies will benefit as they answer the extraordinary demand for metals and scrap."

What’s in Store for Recyclers

As Eastern Europe gropes for economic stability in its new position, European Community members assess future scrap markets with optimism, while U.S. scrap exporters view a united Europe with a mixture of hope and caution.

“It appears as if the uniting of the two Germanys may be the first major change we will see in the new European economic relationship, and the first to have some impact on Western Europe,” says one German metal executive. One major step was taken in that direction on July 1, when East German currency could be traded one-to-one for West German marks, giving East Germany “an opportunity to get its hands on real money,” adds this official.

Money, or perhaps more appropriate, “credit,” likely will be the big problem when it comes to trading with many of these Eastern Bloc countries, which simply don'’ have the financial resources needed to move their economies out of their present morass. Says one European metal official, “It’s obvious that we will have to invest large sums of money in order to get things started.” Already there’s been talk of a vast “Marshall Plan” to help East European countries rebuild their broken-down economies. A recent meeting of the Parliamentary Assembly Council of Europe proposed a target of $400 billion for this purpose.

One of the questions being asked is whether the Soviet Union, already facing critical economic challenges, will have to sell off more gold, nickel, and other metals in exchange for cash. Others question whether some of the satellite countries possessing some raw materials also will be forced to dispose of their supplies in order to secure finances to purchase the products they need.

East and West German Ventures

It has been reported that Krupp and Thyssen, two West German companies, already have entered or are about to enter into joint ventures with East German companies: Krupp is said to be investing in the rebuilding of steel and special alloy works; Thyssen is said to be planning to provide assistance in restructuring East German steel production. Published reports indicate that Metallgesellschaft AG, of West Germany, which has had some experience in trading with East Germany, is slating considerable financial outlay for investment in East Germany. The company's chairman, Heinz Schimmelbach, was quoted recently as saying, "There is substantial competition in the Eastern European Bloc, [which is] a big market with a huge backlog of demand. It's a magnet for everybody who has something to offer."

Similar sentiment exists in the United States. "A united Germany will be particularly strong in the East European market, " explains a U.S. scrap executive who exports to that country.

West Germany showed a continued expanding role in the European aluminum market in 1989, according to the West German Aluminum Industry Association. Aluminum consumption rose by 6 percent in 1989 compared with 1988, reaching approximately 2 million metric tons (mt). Secondary aluminum production was 537,000 mt, up 1.3 percent and a new record. In the first quarter of 1990, West Germany imported from the United States 6,400 mt of copper scrap and 3,400 mt of aluminum scrap.

Eastern Bloc As EC Member?

The effect on the EC of the events m the Eastern Bloc countries is already apparent, according to such observers as Francis Veys, general secretary of the Bureau International de la Recuperation (BIR), Brussels, Belgium, who says that some Eastern European countries have had contact with the EC and are seeking to attain membership status in that organization.

The opposite effect may hit BIR, which traditionally has included a number of Eastern Bloc scrap organizations as members. However, Veys notes that the quick changeover from state-subsidized and -controlled organizations into freer agencies has caused some dislocations. Czechoslovakia, he says, has had to lapse its BIR membership until it can find a new scrap business membership basis.

On the plus side in Czechoslovakia, Heinz Pariser, of Heinz H. Pariser Alloy Metals & Steel, West Germany, is conducting a special steel conference in Prague, Czechoslovakia, this month that will include talks on stainless steel scrap.

Absorption of Eastern Bloc countries into the EC, however, will not be easy. Renato Ruggiero, Italy's trade minister who began a six-month term in July as chairman of the EC Council of Ministers for International Trade Issues, says that "the unique political and economic status of former Soviet satellite countries will prevent, at least initially, normal membership in the European Community." A “special arrangement,” he said, will have to be evolved.

Will these satellite countries be asked to supply the needs of the Soviet Union first, before they can trade with Western Europe? No one seems to know for certain how the flow of metals or scrap will develop, although some observers believe that attempts are already under way m countries such as Hungary and Poland to establish trade patterns with the West.

On the demand side, Michael Steel, market research manager for Johnson Matthey, London, in a recent interview with the Journal of Commerce, said that the opening up of Eastern Europe could mean increases in platinum demand by at least 500,000 troy ounces in the next few years.

U.S. Opportunities and Inopportunities

If one examines the ferrous and nonferrous U.S. scrap export statistics for the first quarter of 1990, not a single East European country appears on the list as an importer of U.S. scrap. Industry members believe, however, that U.S. scrap has moved to some of these countries through shipments from other importing nations. "Until the political situation settles down," says one U.S. scrap shipper, pointing to what has been taking place in Romania, “we don't know what the outcome will be and I doubt if many exporters will commit material to these countries.”

What will be the outcome when things do settle down? "It could present a big competitive problem for U.S. scrap exporters if Western Europe monopolizes the Eastern European trade," predicts one East Coast shipper. Others point to the possibility of a strengthened and united Europe "moving scrap not only on the European continent, but also, via Rotterdam, to as far as China."

One impact resulting from the vast changes in Europe is malting itself felt in the nickel industry. It has been widely reported that talks have been going on between the United States and the Soviet Union to end the ban on imports of Soviet nickel, which has been in effect for the past six years. The ban was originally imposed because it was believed that Soviet nickel contained percentages of Cuban nickel. If the ban is lifted, and some observers think it will be this year, Soviet nickel may soon be flowing into the United States.

There's little doubt that the concept of a "Fortress Europe” sobers U.S. businessmen, including steel producers, copper and brass product producers, aluminum shippers, and scrap sellers. Earlier this year, the U.S. International Trade Commission issued a report that lists the measures taken by EC governments to bring about freer trade with one another by 1992. "Since the United States is outside the European Community," the report explains, "measures that reduce internal barriers but leave external barriers unchanged cause trade diversion, that is, trade among EC member states at the expense of trade between the United States and the European Community."

In the past, there have been protests from U.S. copper product manufacturers about "level playing fields." Now, U.S. aluminum executives are expressing similar concerns. In May, Paul Drack, of Alumax Inc., Norcross, Georgia, and chairman of the Aluminum Association, was quoted as saying, "We put tremendous effort in letting our trade negotiators know that we are prepared to compete anywhere without special treatment if they just get us a level playing field. You'll notice that since our trade mission to Europe last year, comments in the press by U.S. @e negotiators often include a reference to aluminum."

There is also the opinion that expanding needs in East Europe for new infrastructure will require tonnages of metals and scrap. BIR's Veys anticipates "a need for scrap in most of these countries ... but there will be a problem in payment because of their lack of financial stability. They will need a huge amount of aid, and some of it may have to come from the United States." Adds a U.S. metal official: "In the long run, U.S. companies will benefit as they answer the extraordinary demand for metals and scrap."