Spanning the Globe

Each month, Recycling Today Global Edition is sent out via e-mail to subscribers around the world. Readers of the publication are secondary commodities processors and traders doing business in Europe, Asia, North America and wherever else in the world where secondary materials are traded.

The following are a sampling of commodity reports from processors and traders from around the world who contribute to Recycling Today Global Edition. Each issue of the magazine contains a number of such reports from English-speaking contributors with firsthand knowledge of scrap supply, demand and material flow patterns. These reports, from the September and October issues, cover activity during the late summer and early fall.

Those interested in subscribing to Recycling Today Global Edition can find more information at www.Recycling
TodayGlobal.com. Those interested in contributing a regional market report on ferrous or nonferrous scrap, recovered fiber or plastic scrap can contact Zack Lloyd of the Recycling Today Media group at
zlloyd@gie.net.

NONFERROUS SCRAP >> CHINA, FAR EAST

David W. Chiao, Uni-All Group Ltd.

The market in China is down on the COMEX. I think there are several reasons. One is that the import duty has been adjusted to the full value of the COMEX for secondary material and scrap, so everybody is overpaying the duty. The second reason is that in the export-dominated areas, such as Guangzhou, the consumers are still suffering from losing their export orders.

That’s why they are not placing orders for raw materials as they used to. Also, the third reason is that the Raw Materials National Reserve Bureau is now releasing its inventory information. Before, nobody could tell how much inventory it had. Once the bureau releases its on-hand inventory from the COMEX warehouse, it will bring down the market price, of course. The final reason for the down market is that industry and the overall economy has not really recovered from last October’s big crash.

Therefore, because of these composite reasons, China is not doing as well as everybody was expecting in all metals—not just copper, necessarily. Stainless is way below the U.S. market, as are copper and aluminum. Also, ferrous scrap is overstocked and there is overcapacity in China.

 I know that Japan hasn’t really been placing strong orders with the aluminum ingot makers in China. That has been going on for probably about five months or so. They are offering prices way below production costs, so Japan is not doing well either.

For the rest of the year, I am still optimistic. The growing markets, like China has been the past two years, have to buy somehow. They have to make adjustments on their prices.

I think probably after October, China will not be back up for a good two months or so. Then it is the Chinese New Year, and after that things will start coming back again. Right now, nobody has much inventory. Nobody has pricing for orders either, especially in Southern China.

There is still significant congestion in the ports. On the shipping lines, several big vessels have been pulled out of service, making shipping space very tight. The containers are in short supply. For our company and for other exporters, during the past 20 and 30 years, our empty equipment supply has depended on the inbound shipments coming from the United States. These inbound shipments have been reduced by 30 percent to 40 percent. Also, every month we are facing a bunker fuel surcharge. Bunker surcharges for September ranged from $50 to $200. In October, there will be another surcharge in the $50 to $200 range.

You’re looking at the composite effect of everything. The whole cycle has been totally changed. Scrap exporters rely on inbound imports, and the finished goods exporters from China rely on the U.S. and Japan and the E.U. countries’ consumption (or consumer confidence) for their export orders. And the manufacturers rely on those consumers’ orders for raw materials, and, as importers in China, we rely on the smelters getting some orders. All of a sudden, the scale of the whole cycle has been shrunk by 30 percent to 40 percent. It’s a difficult time.

There is a big project underway in China to expand high-speed train lines within the country. The train will start in full operation on the coast by the end of this year and then gradually expand into the inner part of China.
Eventually the recovered nonferrous markets will see a benefit from big projects like this one.

David Chiao of Uni-All Group Ltd. Can be contacted at uniall@yahoo.com.

NONFERROUS SCRAP >> CHINA

TopRecycle, www.TopRecycle.com

The customs clearance of scrap metal import containers in Guangdong remains a focus of attention in the market. Overseas suppliers also have expressed concern about customs clearance. Some traders say China’s Customs and Excise Department is strengthening inspections of all containers of metal imports to prevent violations, such as hiding the true nature of the shipment, omitting information on the shipment or under-reporting the volume.
Concerning China’s new customs policy, many importers say they really do not know how to properly make a customs declaration for incoming shipments, leading to some containers being stranded at ports.

As before, the slowdown of customs clearance in Guangzhou has resulted in a large number of containers transferred to Guangxi, Ningbo of Zhejiang and other destinations. The overall effect has been a tightening of copper scrap supplies, which has helped to give copper scrap prices in Guangdong resilience against price declines.

Also affected by strict customs inspections, the volume of copper scrap imported this year is much lower than in 2008, with refined copper being used to make up the supply gap. China’s refined copper import volume in June hit an historic high, while copper scrap imports decreased.

This report has been prepared by Top-
Recycle, a market information company found on the Web at www.TopRecycle.com.

NONFERROUS, FERROUS SCRAP >> EUROPE

Anton van Genuchten, Reukema Recycling

Scrap material flows are modest, influenced by the [summer] holiday season and subdued economic activity. If and when economies pickup, scrap collection is bound to lag behind demand in light of low stocks throughout the distribution channels and within plants.

European demand for nonferrous scrap is still modest and subdued, though some restocking and restarting of capacity has occurred and more is predicted in the future. However, nonferrous markets remain 90 percent export driven.

Inland demand for ferrous scrap steadied at a lower volume, with prices edging up as the supply/demand balance moved closer to equilibrium. Export activity is modest for ferrous, especially on containerized shipments to Asia.
Stainless steel scrap is scarce and much sought after, and, therefore, competition for the material is fierce. The demand and production in the coming quarter is predicted to increase considerably.

On the ferrous side, many different “cash for clunkers” programs are boosting the used car recycling industry while also exaggerating supply versus depollution and recycling machinery capacity. As a result, piles of autos are building at dismantlers and shredders yards.

India’s new export regulations have caused much confusion, causing exporters to avoid shipping there.

Anton van Genuchten can be contacted at a.vangenuchten@reukema.com.

NONFERROUS SCRAP >> GLOBAL

Robin Bhar, Caylon Credit Agricole CIB

Primary metals have been fairly strong, particularly copper, but also aluminum and other metals. I suppose copper has been leading the way. It’s a barometer of sentiment on the London Metal Exchange and with COMEX in New York.

A big factor affecting all commodities, not just metals, has been the much weaker dollar. Because commodities and metals are priced in U.S. dollars, as the U.S. dollar weakens, one finds that the dollar price of a commodity tends to go up. This inverse relationship has been a key trend that we have seen for most of this year. In fact, on a day-to-day basis, metals, rightly or wrongly, seem to be taking a cue from what the dollar does against the euro, in particular, and against the other currencies that are on a trade-weighted basis. We’ve seen the dollar weaken against the euro quite dramatically in the last few weeks, and that has given a bit of an upside to metal prices.

Additionally, the macroeconomic environment in the past few months has been more encouraging, particularly from the metals-intensive manufacturing sector, which has been in recession up until the second quarter. Recent data on housing, the auto sector and building construction, as well as other general macroeconomic data, give the sense that we are pulling out of the recession. Although it is likely to be a very slow upward progress from here, it does look as if more encouraging data are coming out supporting commodity markets and metals in particular.

This return-to-growth scenario, after 12 months of literally no growth or negative growth, has helped to bolster sentiment in the metals market. Although we are still waiting for a pickup in real demand, de-stocking appears to be ending in most economies. Because de-stocking has now ended and orders are increasing, end users have started refilling their manufacturing supply chain, which of course has been fairly depleted in the downturn.
Some end users are restocking, while others have not started. They are still maintaining a hand-to-mouth purchasing pattern, coming into the market when they get an order from their end users. Uncertainty prevails going forward. Even though macro data is positive, it hasn’t yet fed through to a real pickup in end user demand.

With the fourth quarter almost upon us, this marks the end of summer and an increase in industrial activity. There is a lot of hope that the improved economic data will actually feed through into stronger order books and a pickup in end user demand.

While there was talk that the Chinese were going to dump their material into the market, I think that remains a rumor. Of course, China’s is one economy where we have seen very strong economic growth and a real pickup in metals demand. I would tend to think that the market has now come to the conclusion that dumping of metals is less likely, if it had any truth in the first place. Because metal prices are still pretty strong, and they have been for awhile now, I would think that we should have seen evidence of that dumping already. As of today we still haven’t seen anything.

I think there also is a feeling that building strategic stocks, which they’re eventually going to consume, is a way of diversifying away from putting everything into dollars.
 
Robin Bhar can be contacted at robin.bhar@uk.caylon.com

FERROUS SCRAP >> RUSSIA

Andrey Balashov, TYOR Commercial Inc.

In the last several weeks, we have experienced increased prices. Local steel mills are increasing prices very rapidly. They are trying to build up their stocks, and that means they have to buy many more tons more per month than they need normally. We experienced quite a strong scrap shortage because industry wants to ship it.

Nevertheless, we still have markets for exports because the world markets are really strong. This is the main competition for the domestic market. At the moment there is not any news regarding the change in regulation for scrap exports. It will continue this way for this year and next year. There may be some changes in the future to protect the industry.

Domestic steel mills have been slower in paying their bills, and the problem still continues because they don’t have much money. They are paying now with a one-month delay. They are willing to take some debt to push people to continue deliveries. They will pay more quickly if you have more deliveries.

The prices of finished products have risen. Finally they have orders for finished products, and they continue to sell domestically and to Turkey.

I hope eventually they have a positive cash flow, because right now they finally have some income and they can start to pay from that.
 
Andrey Balashov of TYOR Commercial Inc. can be contacted at balashov@tyor.ru.

FERROUS SCRAP >> NORTH AMERICA

Mitchell Padnos, Louis Padnos Iron & Metal Co.

We’re seeing improved flows in all grades right now, primary and secondary. Things were so bad in June and for most of July that you would anticipate an increase in the flow, and we are seeing it. We’re seeing and we’re hearing from our suppliers that they have increased orders, and they are working to fill them now.

Supply of scrap is good. The steel service centers have successfully worked their inventories down to below what they would consider their normal levels. Now with the increase in demand, the big question is how true is that increase and how long will that last? But there is currently an increase in demand, and I think the steel service centers are scrambling to fill orders. I don’t think there is any shortage, but I think that because the steel service centers are below the level that they are accustomed to, they are looking for more steel, and that is having a trickle-down impact where the mills are now running at better levels. Steel mills are increasing the number of blast furnaces out there.

The pessimistic side of this is there are those who say we are going to be over capacity in steel requirements [soon] because this is not a true recovery and the mills are jumping in too fast.

I tend to take the more optimistic view and I would have to believe that a lot of discussion and research went on before major corporations decided to light additional blast furnace capacity.

Mitchell Padnos can be contacted at mitch@padnos.com.

FERROUS SCRAP >> WESTERN EUROPE

Ruggero Alocci, Alocci Rappresentanze Industriali

The summer holidays are over. After positive signs in July, in August more signs confirmed the beginning of the economic recovery. Is it the real exit of the recession or, as sometimes happens, a false turning point? It is very difficult to tell.

Today, we can be easily satisfied considering the flat products price increase, the better steel demand, some oxygen furnace restarts and electric arc furnaces (EAF) resuming production.

It is important to keep up with the Chinese and Indian market slowdown and the end of Ramadan to determine what the last months of 2009 could bring.

In Italy the July scrap market was characterized by long summer stoppages, with low demand and small price increases. The first three weeks of August passed without significant activity. At the end of August, better demand from the mills boosted prices. Now the end users are following the international market to balance the lower domestic prices to the higher ones quoted in Germany, France and Turkey. About 35,000 metric tons of pig iron, 5,000 metric tons of scrap and 16,000 tons of HBI (hot briquetted iron) have arrived by vessel for July/August.
The September prices will grow following better demand and steel production increases.

Ruggero Alocci can be contacted via e-mail at mail@alocci.com.

RECOVERED FIBER >> EUROPE

Dominique Maguin, La Compagnie des Matieres Premieres

The market for the brown grades is recovering a bit. We have more demand, and the mills that were standing by for quite a period are starting again. They need to buy for their factories, and this is good.

Demand from the East Asian countries is quite good. It seems that prices could go up a bit. The bad news is we can also see some mills that are going to close down. We have one very old paper mill in the south part of France that consumes 20,000 to 25,000 tons annually that was closed Sept. 15.

I think we will see some paper mills closing down forever in Europe. All the small mills are going to close, because I don’t see any way that they can compete against the big mills in Europe, the United States and Asia. On each continent you now have big mills, and it is becoming more difficult for the smaller paper mills to compete.

The tissue mills are up and running well. This business is doing well, and I think it is the same in other parts of the world; it’s not exclusive to Europe.

The mills that are producing news and magazine paper, I think they are starting to improve a bit. Maybe these are the first signs of a recovery.

But the bad news is that the shipping lines have increased the cost of freight tremendously. So what you are earning on your trading, you are spending on freight.

Dominique Maguin can be contacted at dominique.maguin@cmp-sas.com.

RECOVERED FIBER >> INDIA

Amit Patel, HnS International

Economic activity in India has been stable throughout the crisis, with less adverse impact given the relatively minor export dependence as compared to that of China. Thus, demand for recycled fiber for most grades has been stable and growing even in 2009.

During the last three to four months, Chinese mills have been buying strongly, pushing worldwide prices of recycled fiber higher and higher. The robustness has a lot to do with artificial government stimuli/spending to boost domestic consumption with a long-term goal to reduce export dependence for economic growth.

Just like the rest of the world, India also has to pay high prices because of large Chinese demand. The carnage of the last year or so has left a number of shipping companies in trouble, and the current increase in shipping activity is giving them reason to push price increases too. Shipping costs to India have gone up by $250 to $350 per 40-foot container during the last four to five months and continue upward. Order positions at Indian mills are also stable, as end users buy for inventory again versus buying for order fulfillment only during the tumult of late 2008. October of 2009 also shall usher in higher shipping costs into China.

Shipping lines, scrap paper suppliers, traders and paper mills worldwide are all hoping that the bottom is reached and that the situation shall slowly stabilize. The tumult of the last year also has reduced fiber generation in the U.S. as it became uneconomical in the short term during the crash in the fourth quarter of 2008. This, in turn, has taken recycled fiber prices north recently as artificial demand created by government stimuli in Europe, the U.S. and China generated economic activity. The question remains what will happen when government stimuli/spending is removed and the private sector has to pick up the slack once again.

Amit Patel can be contacted at amitpatel@hns-int.nl.

RECOVERED FIBER >> NORTH AMERICA

Jonathan Gold, Newark Group

Fiber generation continues to remain soft. Consumer spending, or the lack of it, is not producing collectable fiber. The Internet continues to attract readers and, as a result, there are fewer newspapers and magazines available from curbside recycling programs. Overall fiber generation continues to decrease. Material flow is most affected by the state of the economy and the lack of public spending.

Demand remains strong for all grades of fiber, except that recently China has pulled back on purchasing OCC (old corrugated containers), dropping the price. Domestic mills have begun to stock up with higher inventories than they have had in previous months.

Recently, overseas demand has been very good, except for OCC, which has dropped $15 to $20 per ton on the export side as China has reduced its purchases. The decreased demand from China is because of high prices and an increase in overseas freight prices. Most exports are going to the Far East and India.

Jonathan Gold can be contacted at jgold@tngus.com.