2009 A Rebuilding Year

Sports fans are most likely familiar with the term “rebuilding year,” which is often used by coaches or general managers when either looking back on a disappointing season or bracing fans for an upcoming one that will feature more losses than victories.

hen things go according to plan in the sports world, some good can come out of a rebuilding year, as a franchise genuinely takes steps to improve its team and its future prospects.

For recyclers and traders who suffered losses during the final months of 2008, ideally 2009 has been that same type of rebuilding year. The year may not have been full of highlight-reel plays, but recyclers say they are hopeful that a firm foundation with supply-and-demand equilibrium now underlies most secondary materials markets.

TIME TO REFLECT
The BIR (Bureau of International Recycling) Autumn Round-Table Sessions event, with its seven commodity-specific meetings, provided a forum for recyclers and traders from throughout the world to compare notes and provide recycling market updates.

This year’s autumn BIR event was held in late October at the Okura Hotel Amsterdam. Programming at the Round-Table included several BIR committee meetings and eight sessions open to all attendees: seven commodity-specific divisional sessions plus the meeting of the International Environment Council.

A “worst is over” mentality was present at the BIR Non-Ferrous Metals Round-Table, which featured reports from scrap traders and processors from throughout the world.

Division President Robert Stein of St. Louis-based Alter Trading remarked, “A year ago we met in Dusseldorf (Germany) amidst what was arguably the most challenging financial and stressful time for our industry in modern times.”

In the ensuing 12 months, “Our business, as it so often does, proves itself to be resilient and capable of responding to whatever adversarial circumstances come our way,” Stein stated.

He added that base metal prices had improved, and “demand for our products from developing nations continues to be strong.” Less certain is the strength of economies in North America and Europe, where, Stein said, “The driving force has been governments who have provided financial stimuli to their domestic industries to promote economic growth.”

Regarding economic stimulus plans, guest speaker Michael Widmer, who is with a Merrill Lynch office in the U. K., singled out China. “Substantial parts of China’s stimulus package are targeted at infrastructure,” he said. “Metal-intensive products have also been helped by specific government measures in China.”

The end result has been that “China’s copper demand has picked up the slack” for reduced demand in other parts of the world, Widmer said.

BIR Non-Ferrous Division Vice President Dhawal Shah of Metco Marketing in India summarized nonferrous markets in several parts of the world. His summary characterized the Middle East as a market where business conditions have shown improvement, while trade volumes in the United States have “shrunk to 50 percent compared with the highs of last year.”

NEUTRAL GEAR FOR STEEL
At the Ferrous Division meeting, Blake Kelley of Sims Metal Management Ltd.’s New York office expressed similar concerns for the near-term market. “The over-riding issue is that there is still idled capacity,” he said of the steel industry. “So despite consolidation, steel prices are unlikely to increase to sustainable levels anytime soon.”
Tom Bird, a trader based in the United Kingdom, noted that the market experienced export demand-driven optimism during the summer, but that optimism has been tempered by a downturn in buying in October, followed by what is expected to be a slow conclusion to 2009. “Many operators are expecting an improvement in early 2010; much will depend on the steel sector market and its management of stock levels,” said Bird.

Markus Barg of Germany’s TSR noted that steel mills in the EU had produced some 41 percent less steel in the first eight months of 2009 compared with 2008. “The financial and economic crises have had a huge negative impact on the European building, ship building, engineering and construction industries,” stated Barg. “An extensive drop in demand [from] these industries has led to a decrease of the crude steel production in the EU.”

In the EU export markets thus far in 2009, Turkey was the biggest buyer of scrap at nearly 3 million metric tons, followed by India at 1.1 million metric tons, China at 610,000 metric tons and Pakistan at 410,0000 metric tons
The decline in domestic and export markets revealed the extent of the drop in ferrous scrap generation and processing activity in 2009, said Barg. “We have to bear in mind that the development of the steel scrap market is closely linked with the development of the steel markets,” he remarked. “Here—especially in Europe—the circumstances are far from good, and, against most of what the media want to make us believe, a fundamental recovery is not in sight.”

Guest speaker Dr. Thomas Ludwig, an analyst with Germany’s Klockner & Co., portrayed the dismal European economic climate with an array of statistics, but offered some rays of hope for attendees.

“The second quarter 2009 manufacturing purchasing managers index (PMI) indicates that the loss of confidence has bottomed out,” said Ludwig. “In the third quarter, the PMI indicator confirmed a positive mood.”

For ferrous scrap shippers in the United States, Europe and elsewhere, “The wild card is China,” said Ludwig. He added, “The biggest steel producer is the Chinese government, not Mr. [Lakshmi] Mittal (chairman of ArcelorMittal).” Ludwig noted that China has been growing in steel production for more than six consecutive years.

NONMETALLICS PULSE
In the recovered fiber sector, guest speaker Bill Moore of Moore & Associates, Atlanta, provided an update on global market trends at the Paper Division meeting.

For OCC (old corrugated containers), Moore said containerboard companies were in an overcapacity situation in both North America and Europe, but “China’s domestic economy is growing nicely. Its OCC imports have been fairly steady, and many delayed board machine capital projects are again back on track.”

The ONP (old newspapers) market is affected by what Moore calls a “structural decline in newsprint use in all the world’s developed economies.” Added Moore, “It’s extremely acute in North America; it’s a really sick industry.”
Markus Ocklind of Sweden’s IL Recycling summarized activity in northern Europe by noting that consumption of the material has decreased by 11 percent in 2009 compared with the same time span in 2008 in Sweden.
“The supply and demand for OCC is balanced,” added Ocklind. “We can see more activity in the south of Sweden due to the start-up of the new Mondi machine in Poland.”

In Spain, Francisco Donoso of Reciclajes Dolaf noted that the country’s mills have been operating at a far reduced capacity in 2009. In the first eight months of the year, Spain imported 420,000 metric tons of recovered fiber and exported 600,000 metric tons. Donoso said Spain was “a net exporter [of recovered fiber] for the first time in our history.”

In the plastics segment, export orders for European shippers decreased in October, noted Peter Daalder of Daly Plastics, based in the Netherlands.

New competition for plastics recyclers will soon come in the form of additional virgin polyethylene and polypropylene plastic production in the Middle East, Daalder noted. “Realizing that there is already enough material on the market, for the future we must calculate that prices will remain on a lower level than before.”

Division President Surendra Borad of Gemini Corp. in Belgium also commented on the new capacity and its impact. “By 2015, there will be a need for daily loading of 4,000 containers per day from the Middle East to Europe and the U.S.A.,” to ship out the new polymers production, said Borad.

But the overall scenario is one of global demand for polymers and plastics, including recycled plastics, said Borad. “What I want to convey is that there will be a substantial increase in trade in recyclables,” he said. “We must be prepared for a lot of opportunities and challenges. This is the main reason I call it a very exciting profession.”

The author is editor-in-chief of Recycling Today and can be contacted at btaylor@gie.net.