Receiving a booster shot

Scrap recyclers battling fierce competition and low scale prices largely were happy that on the latter front they received a reprieve in the spring, as higher ferrous scrap prices helped bring more metal of all types across scrap yard scales.

Recyclers contacted in early May still found plenty of worrying market conditions, but many also acknowledged that the higher ferrous prices boosted their recent volumes compared with the very lean preceding months from October 2015 through March 2016.

A recycler in the Midwest says April was the first month in 2016 when his scrap intake volume met or surpassed the comparable month in 2015. A recycler in the eastern U.S. simply says “flows are better” after the April ferrous scrap price hike brought along additional copper and aluminum.

On the sell side, the growing role of Indian scrap buyers has been noticeable in several parts of the country. A recycler in the Gulf Coast region says he has been busy loading containers heading to the Port of Savannah in Georgia and then bound for Indian destinations.

“The market now is different from a couple of years ago,” he comments. “My buyers in China are in and out of the market, while it is my buyers in India—or in the case of motors or sealed units, Pakistan—who are steady and reliable.”

The East Coast recycler says of India, “It is a very active nonferrous market, with some new Indian players quoting” in early 2016.

By raw numbers, as measured by the United States Department of Commerce and tracked by the U.S Geological Survey (USGS), India still has a long way to go to match China’s nonferrous scrap buying strength in the American scrap market.

In the first two months of 2016, according to USGS, India imported 6.1 million metric tons of aluminum scrap from the U.S. That compares with 110 million metric tons brought in by China and an almost identical 6.05 million metric tons imported by Hong Kong, which is tracked separately.

Similarly, while the U.S. sent some 660,000 metric tons of alloyed and unalloyed copper scrap to China in 2015, India received just 21,530 metric tons of the same secondary commodities.

“My buyers in China are in and out of the market, while it is my buyers in India who are steady and reliable.” – Gulf Coast region recycler

What happens in China is likely to continue to have a major impact on demand and pricing for scrap in the U.S. in 2016, which is why it was a key part of the discussion at the “Spotlight on the Economy” at the Institute of Scrap Recycling Industries (ISRI) Convention & Exposition in April.

Adam Schor, senior vice president and director of global equity strategies at Janus Capital Group in Denver, said China will have important implications in metals markets for the next several years. He said the commodity boom of the last decade was a “once in a lifetime” event and we are currently “living in the hangover of that.”

Schor said demand for metals shifted to China in the last decade, representing more than half of global demand. He said the country is now in destocking mode, and it likely will be two to three years before supply and demand regain balance.

The gradual improvement of the global economy will support an improvement in commodities markets, Schor said, but the exceptional margins the industry saw as the result of the commodities super cycle fueled by China’s growth likely will not return.