Ferrous – It’s hardly news that ferrous scrap prices in the United States have been falling in recent months.
Less clear is the relationship between scrap tags and U.S. economic output. As the following chart dating back to the late 1980’s shows, ferrous scrap prices (along with other commodity prices) plunged during the Great Recession, but falling ferrous scrap prices haven’t always coincided with economic contraction. Instead, what we have seen is that economic growth tends to slow significantly around the time of sustained declines in ferrous scrap metal prices, such as the period we currently find ourselves in.
Slowing overseas demand for U.S. ferrous scrap has not helped matters this year. According to figures from the U.S. Census Bureau, U.S. ferrous scrap exports (excluding stainless steel and alloy steel scrap) were down more than 14 percent year-to-date through April to less than 4.6 million metric tons due in part to weaker demand from Turkey, Taiwan, Mexico, Bangladesh, India, Thailand, Egypt, and China. On the positive side of the equation, reported ferrous scrap exports to South Korea have more than tripled to +503 kt while trade with Malaysia was up 163.5% to nearly 355 kt.
Most nonferrous metal prices have lacked support as of late, with year-to-date prices for LME 3-mo. aluminum and copper down 4.1% and 2.6%, respectively, as of last Friday. Last week, LME 3-mo. aluminum traded in a band around $1,752.50/mt - $1,797.50/mt, or around 79.5 to 81.5 cents per pound.
For U.S. aluminum scrap exporters, which commodities will be allowed into China after July 1 remains a critical issue. For the year-to-date (through April), U.S. exports of aluminum scrap (including UBC’s and RSI) to mainland China were down 34 percent to just over 157,000 metric tons, although most other scrap commodity exports to China have seen a much steeper drop. As aluminum scrap demand has picked up in South Korea (+35%), India (+116%), Malaysia (+86%), Indonesia (+154%), the Census Bureau reports that U.S. aluminum scrap exports are actually up more than 16 percent so far this year.
Paper and Plastic –
As per ISRI’s Member Update last week, “Last month, in an effort to crack down on illegal shipments, the Indonesian government imposed new regulations on imports of recovered paper. The rules included a 0.5% contamination limit and 100% pre-shipment inspections, including separating containers into bales. The government has now announced that it will instead use the ISRI specifications for recovered paper which set a standard of 1-2% for prohibitives and 3-4% for outhrows. It is also using the specifications to define its use of the word "homogenous" in describing the condition of bales…
Confusion reigned over the global recovered paper industry when Indonesia introduced new restrictions last month on imports. The regulations, not in-line with global trading, set a contamination limit of 0.5% and that incoming shipments needed to be "clean, dry, and homogenous." There was very little clarity given to what exactly those words meant. The resulting confusion severely impacted the market for recovered paper…
In a move that will benefit paper recyclers and provide clear guidance on the trade of recovered paper, the Indonesian government updated the new regulations and adjusted them in accordance with ISRI specifications…
Through its international outreach efforts and education on its internationally-used specifications, ISRI has helped achieve a major victory for the paper recycling industry. As the ISRI's scrap specifications, including its Guidelines for Paper Stock: PS-2018, are internationally recognized used by buyers and sellers of recycled materials and products, their use by the Indonesian government ensures clarity of its regulation.” Great job ISRI!
Meanwhile, on the plastic scrap front the Census Bureau reports U.S. exports during Jan-Apr 2019 were down 47% as compared to the first 4 months of 2018 to 233,445 metric tons as scrap PVC shipments plunged 83% lower, PET exports were down 43%, and “other” plastic scrap exports were off 50 percent.