Positive signs amidst gloomy conditions

Lisa McKenna

Economic conditions around the world in recent weeks have seemed to amount to a long list of disappointing statistics, forecasts and reports.

As one of my colleagues suggested, current economic conditions are creating a virtual “perfect storm” that is not very conducive to healthy global commodities markets.

Just some of those economic conditions include, at the top of the list, the current low oil prices near $55 per barrel, compared with around twice that level early in 2014.

The low oil prices hit recyclers especially hard because they have the potential to undermine the value of recycled plastics.

They have also affected the energy sector, a major contributor to the global economy.

Low oil prices also appear to be contributing in some way to negative levels of inflation in the euro area, according to a recent Eurostat report.

Another weight upon the recycling industry has been the extended drop in demand for secondary commodities such as fibre, plastics and nonferrous metals from China. The significant change from previous years has contributed to excess supply and lower prices for recycled goods and scrap metals, further eroding profitability in the recycling sector.

Meanwhile, the European Union continues to struggle to attain more positive levels of economic growth. According to Eurostat, going forward, weak growth of 0.3% is expected for the fourth quarter of 2014 and 0.4% for the first quarter of 2015.

While it seems like a preponderance of bad news for the industry, there also are positive signs. One of these (for Europeans) has been the weakness of the euro against the U.S. dollar, as well as—wait for it—low oil prices, which Eurostat says could help boost confidence levels in the manufacturing sector.

Additionally, many of the emerging recycling markets also hold promise for the industry. One of them is India, which has shown solid demand for a range of secondary commodities. According to Eurostat, India posted GDP growth of 1.5% in the third quarter of 2014, up from 1.3% growth in the second quarter.

And at the inaugural Paper Recycling Conference India, held in late January 2015 in New Delhi, recyclers in the recovered fibre sector backed up this positive outlook in India, noting that the country has a deficit of feedstock and plenty of untapped collection potential domestically.