Along for the Ride

I will give you a little peek into how we at Recycling Today go about our daily business. First, we all read a lot of industry-related, general business and news articles, magazines and Web sites for insight into the dynamics of the recycling industry and the forces that affect it. Secondly, and much more importantly, we talk to people in the industry about their businesses. Our staff members also interact on a regular basis, discussing what we are hearing and what we think is of interest and importance to our readers and the industry at large.

While the recycling industry is largely straightforward—material is collected, processed and sold—a host of nuances affect the process. One of the more challenging, and often vexing, parts of the job is getting the details on the commodities markets. Getting a grasp of the market means talking to quite a few people on a fairly regular basis to get a sense of where markets are headed.

The business environment has changed significantly from only a few years ago. More recently, speculators have taken a much greater stake in commodity markets. Investment houses, hedge funds and a host of companies have sought out commodity trading as a potentially lucrative investment vehicle. As financial institutions pour money into (and drain money out of) some commodities markets, this dynamic has created a new layer of uncertainty within the secondary commodities industry.

This changing nature of commodities markets has left many long-time scrap dealers on the sidelines, less certain about the direction of the market. More often than not, when I ask scrap dealers where they see a commodity market heading, they basically shrug their shoulders and say they don’t know, adding that they are most concerned with moving material so they won’t get stuck holding too much tonnage if the market posts a correction.

Some scrap recyclers say they fear being on the wrong side of a trend. With prices for some nonferrous metals far greater than traditional levels, the cost of being "wrong" on a price could be very expensive.

However, with the influence of hedge funds on commodities markets, the prevailing wisdom among scrap recyclers is that it is better to keep a close watch on their inventories, to avoid looking too far out and to shun speculation.

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