Ups and Downs

After 10 months of relatively stable pricing, some of the volatility that ferrous scrap processors and brokers had witnessed in other secondary commodities markets (but had avoided) began to affect them in November.

Ferrous scrap shippers in the United States had received steady prices for their products from March through October of 2011, whether export demand fluctuated. In November, however, buyers came in with lower offers for many grades of ferrous scrap.

Paper recyclers and red metals traders began experiencing volatility in the third quarter. Demand for recovered paper from Chinese buyers dropped suddenly in late summer, followed by plunging fiber prices.

In September, prices for copper on international exchanges also fell sharply, causing buyers and sellers in many cases to scramble to renegotiate previously made trades.

Throughout 2011, even when prices concluded a given month with little movement, conditions in the world's economy—and in Europe in particular—provided a subtext of anxiety. Traders most likely kept one eye on Internet news sites at all times to make sure the EU would remain coherent and its banks solvent; that U.S. political parties would reach a budget agreement; or that China's economic figures remained buoyant.
 

Iron Resolve
With turmoil as a backdrop throughout the year and the fiber and red metals markets beginning to fade in mid-August, ferrous scrap processors may well have anticipated their market segment would be the next to suffer.

In his report for the Sept./Oct. 2011 issue of Recycling Today Global Edition, Tom Bird of Van Dalen Recycling in the United Kingdom comments, "I think it is fair to say going into the last weeks of August and the very early parts of September, certainly people were anticipating potentially some weakness in the market."

But prices held firm into the autumn months, Bird notes. "After the Ramadan period, we have seen at worst a sideways movement on the Turkish market. I think the European market is slightly down, but not as much as perhaps people were anticipating."

Bird also experienced a circumstance that was cited throughout the year by ferrous processors in Europe and North America. "Supply is very tight," he commented. "Volumes generally around everywhere are a lot tighter than usual. General arisings in the yards and from other sources have tightened up."

Throughout the year, stable pricing seemed to indicate that the reduced supply (sub-2007 levels) was a fairly even match for steel mill production capacities in the 73 percent range in North America and 78 percent as a global average.

Speaking to attendees at the 2011 Bureau of International Recycling (BIR) Autumn Round-Table Sessions in late October in Munich, Blake Kelley of Sims Metal Management in the United States remarked that iron ore and steel prices had been "drifting lower" but steel production "continues at high rates." As for raw materials, steelmakers "will need to restock unless consumption truly decreases," he contended. "The longer they delay, the more urgent their need."

Fellow BIR Round-Table speaker Karl-Ulrich Köhler, managing director and CEO of Tata Steel Europe, predicted that ferrous scrap would remain "structurally scarce" and that prices would stay strong but with some regional volatility.

Also at the same BIR Ferrous Division meeting, Bird of Van Dalen Recycling said encouragement should be derived from the fact that "business is still being done, reflecting demand," and that although prices have fallen, current levels "are not as low as some were forecasting."

Bird, who also is president of the European Ferrous Recovery and Recycling Federation (EFR), said compared with the crisis of 2008, "our customers are more robust, more consolidated and far more likely to continue to perform [even] in a falling marketplace."
 

Rapid Pulse
Traders of nonferrous metals, and copper in particular, continued to operate in an environment of historically high prices, with volatility added to the mix in the second half of the year.

While copper's autumn volatility grabbed the spotlight, the world's aluminum market found a more stable plateau.

Measured by London Metal Exchange (LME) aluminum alloy cash buying monthly average pricing, the light metal ranged from $2,272 to $2,398 per metric ton in the first nine months of 2011. That reflects a trading range of about 9 percent from peak to trough during that nine-month period.

In the case of aluminum, the metal was at its low in January, drifted upward through May and then began losing value. Its September average of $2,274 per metric ton put it almost exactly where it started in January.

LME copper, on the other hand, traded from as high as $9,866 per metric ton in February down to $8,313 in September, representing a steeper 16 percent drop. In the red metal's case, there were fluctuations throughout the nine-month period, with the steepest drops occurring in May and September.

In remarks prepared for the 2011 Secondary Metals International Forum, organized by the China Nonferrous Metals Industry Association Recycling Metal Branch (CMRA), BIR Nonferrous Division President Bob Stein said a number of global circumstances made it hard to be excessively gloomy.

Stein, who also is vice president of nonferrous marketing with Alter Trading Co., St. Louis, observed that "the markets have become simply too jumpy—constantly unnerved by the slenderest sliver of positive [or] negative news."

Aluminum's ups and down have been mild compared with copper's in 2011. As portrayed by Recycling Today Global Edition contributor Steve Solomon of Solomon Metals Corp., Lynn, Mass., in the late summer, "There seems to be scrap available, but the problem is getting commitments from consumers to buy it when they don't know what the economic landscape will be for the next several months. It is very difficult to make strong sales in that type of environment."

Uncertainty about Europe's economy and figures that point to slower economic growth in China were helping contribute to copper's price decline, as speculation now seems to figure into copper pricing much more than in previous decades.

As well, new customs rules adopted by China Aug. 12, 2011, led to "traffic jams" at several major ports.

"New regulations in China are continuing to throw confusion into how material can be shipped," Solomon reported in the late summer. "Regulations seem to be changing constantly. People are unsure whether things will change even when things are en route. Just to get bookings of containers has been a challenge. The business is sort of changing on the fly."

When customs and inspection procedures change, both sellers and buyers could experience turmoil, Solomon noted. "There is sort of a lack of confidence that what was a good shipment previously, now when it gets there, the same material is a problem," he said. "Whether the problems are market related or not is hard to tell. All these factors are creating a very frustrating trading environment with no answers. It is very hard, and many of the exporters have been caught in the middle. It is frustrating on [the buyers'] part as well. It is hard to get into deals knowing there could be problems, and the kind of profits the traders are trying to make is not enough to cover potential problems. There is a lot of money at stake," Solomon added.

Paper and Plastic
As with copper, recovered fiber experienced price volatility in 2011 as well as changes in fiber stream composition for plant operators.

A sudden and steep decline in old newspapers (ONP) has caused several dilemmas, according to three executives representing large-volume recycling companies.

At a session at the 2011 Paper Recycling Conference, held in Chicago in late October, Al Metauro of Toronto-based Cascades Recovery noted that in one major city in which Cascades operates, ONP has dropped from making up 81 percent of "blue box" post-residential material seven or eight years ago to just 38 percent today.

Vic Rice of Cellmark Recycling, Corte Madera, Calif., concurred that the volume of ONP "has dropped significantly," adding, "This has had an impact around the world for mills that use this material as a furnish." The problem for these mills occurred not just because of scarcity, Rice said, but also because of "quality degradation." He remarked, "There is a narrow gap today between mixed paper and No. 8 news."

Fellow panelist Pat DeRueda of Waste Management Recycle America (WMRA), Houston, estimated that at the 107 recycling plants operated by WM, ONP has fallen from 60 percent of inbound volume several years ago to 38 percent now.

Panelists were optimistic that Asian markets would continue to work in tandem with domestic mill demand to keep end markets healthy. "I think there is still growth to come in places like India in the next five to 10 years," Rice said.

"China has only 4 percent of the world's forestation but about 20 percent of its population," said DeRueda, who added that OCC (old corrugated container) shipments from the U.S. to China will likely rise again in 2011.

The global significance of Chinese recovered fiber imports was highlighted in the BIR Autumn Round-Table presentation given by Nobutaka Okubo, the vice president of the Japan Recovered Paper Association. He indicated that China accounted for 79.8 percent of all Japanese recovered paper exports last year (slightly less than 3.5 million metric tons). Of the 4.4 million metric tons exported by Japan to all destinations, OCC made up 50.6 percent and news/OMG a further 34.3 percent by grade, said Okubo.

At the BIR Plastics Division Round-Table in Munich, Gregory Cardot of France's Veolia Propreté said there had been a slight drop-off in trading since mid-October within his domestic secondary plastics market. There had been significant problems at Chinese ports and the market was "under pressure," he said.

BIR Plastics Committee Chairman Surendra Borad of Gemini Corp. NV, Belgium, used that same two-word phrase, "under pressure," to describe prices in the United States. As for the market in India, he said it was "absolutely dormant," as many company licenses to import plastic scrap had not been renewed. India's domestic recycling industry, on the other hand, "is doing extremely well" and claimed to have achieved a recycling rate of 47 percent, said Borad.

Although he did not classify the overall economic outlook as especially positive, Borad predicted "a golden future" for the rapidly growing recycling industry. After examining data, he has arrived at the conclusion that the global recycling industry is worth upwards of $500 billion annually and employs as many as 20 million people around the world. The industry "is growing at a tremendous rate that is faster than (world) GDP growth," Borad said.

The author is editorial director of Recycling Today and can be contacted at btaylor@gie.net.