Editor's Focus

The scrap industry has been on quite the roller-coaster ride these last two years. And, with the volatile movement of many recyclable commodities, it is clear that getting an accurate picture of the market is becoming more daunting in light of all the ups and downs.

Many commodities have seen a steep run-up in price in light of a combination of market forces (supply and demand), rumors or a particular play by a financial firm.

As someone who has been covering the recycling industry for quite a few years, it has become even more challenging to get a clear picture of where markets are heading during these last couple of years. Just when it seems like the market for a particular commodity has crested and is heading for a steep decline, some positive indicator comes to the forefront and corrects the trend line.

With this in mind, we are left with the knowledge that what drives the secondary commodities industry is far greater than one particular indicator, such as new housing starts, strong buying by offshore interests, demand from the auto industry or a speculative play by a hedge fund. Secondary commodity markets can also be affected by more regional issues, such as inclement weather that may cause temporary shutdowns of some operations or labor problems that either temporarily close a plant or slow down an operation. In addition, a host of longer-term issues, such as material substitution and growing economies in developing countries, affect the markets.

I learned first hand how fickle these markets could be when I reported earlier this year that copper could be in for some tough times as the year progressed. All the cards were lined up for a sharp correction: prices had climbed, speculators were starting to sell their positions, supply was outpacing demand and ever-present China was sending signals that it was going to back out of the market. Many knowledgeable people had been looking at the same picture and had come up with a similar conclusion: It wasn’t whether copper markets would decline, but rather how sharp the decline would be.

While the markets did dip, and quite precipitously, by the end of last year and through the first few months of this year, it wasn’t long before prices snapped back up, with some reports noting that labor problems at several mines might lead to shortages. Prices, which had been trending downward as recently as February, have rallied by around 50 percent since then.

Perhaps this is mea culpa on being late to the news, or perhaps I was early.

While the timing of some of the market prognosticators may be off, as markets become more uncertain, the key point I have been hearing from recyclers is to operate a business with caution and not with greed.