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As the trade deficit with China has widened, producer price inflation in the United States has moderated lately, including a 0.2 percent month on month decline in the producer price index in December. But why should recyclers care about producer price inflation? First off, the producer price index represents the change in the selling prices received by producers for their output, including scrap. The following chart shows the year-on-year percentage changes over the course of 2018 for the major metal scrap commodities including ferrous scrap, stainless, copper and aluminum scrap as reported by the BLS. As we can see, nonferrous scrap prices significantly underperformed as compared to ferrous scrap, particularly in the second half of last year.
Of course Brexit was in the news again last week after Theresa May’s plan was overwhelmingly defeated in Parliament last week. For scrap recyclers in the U.S., the uncertainty surrounding Brexit has a couple of important implications: one is the potential for an unorderly Brexit to wreak havoc on global financial markets. But more directly, the UK is one of the world’s major scrap exporters. In 2016, the UK was the 4th largest exporter of ferrous scrap in the world, the third largest copper scrap exporter, and second largest recovered paper exporter. Should the Brexit troubles cause a serious meltdown in the UK economy or the value of the British pound, British scrap exports could become much more competitive on the global stage, including for import into the United States.
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