Louis XVI and Marie Antoinette lost their heads in Paris. Nothing nearly so dire happened to the approximately 700 delegates who attended the Bureau of International Recycling’s (BIR) annual convention from May 25 to 27 in the “City of Lights.” And although revolution was not on the minds of attendees, the financial and political chaos in Asia surely was.
“There is an old adage that says when the United States sneezes, the world catches a cold,” said Edward Hollander of Clarendon Ltd., London. “Well today, one might say that Asia has the flu. What will we get?”
Hollander points out that what happens in Asia—from an economic as well as political standpoint—will have a great impact on the United States.
“Foreign countries, particularly those in the Far East, are exporting not only to the U.S., but to anywhere someone will purchase their goods,” Hollander said. “They need foreign exchange and/or hard currency.”
John Crabb, Simsmetal Ltd., North Sydney, Australia, seconded the concerns over Asia.
“In the past six months, the dramatic events in Asia—combined with a significant increase in European scrap availability—has in some way affected everyone in the ferrous scrap business from the smallest dealers to the largest international metal merchants,” said Crabb. “These events appear likely to continue to adversely affect pricing for the foreseeable future.”
CONSOLIDATION TREND
Consolidation is another trend weighing heavily on the scrap business in the United States, notes Hollander. “In the past year, acquisitions have been going on at a furious pace,” he said.
One effect of these consolidations is that large parcels of scrap are available from one company and can be offered to several mills at very competitive prices, says Hollander.
In a keynote address, Marcel Genet, Laplace Conseil, Paris, emphasized that consolidation will be a key to success for scrap firms in the future. Specifically, he stated:
* Successful scrap companies will grow and internationalize their operations.
* Successful scrap companies will consolidate to retain competent staff and diversify skills.
* Successful scrap companies will balance trading culture with strong engineering skills.
* Successful scrap companies will balance short-term profits and long-term optimization.
* Mini-mills, owing to their flexibility and versatility, will become even more competitive.
PAPER MARKETS
Whereas there were some encouraging signs in the recovered paper markets in 1997, the trend has not held up in 1998, according to Stephen Vento, Recycled Fibers International, Sunrise, Fla. Specifically, Vento noted that in 1997, the U.S. generated close to 45 million short tons of recovered paper for domestic consumption.
“This was a 2.1 million short ton increase or 5% increase over 1996,” said Vento. “Domestic mills recycled 36.5 million short tons of recovered paper, which is up nearly 34 million short tons in 1996.”
Vento added that, “recovery of corrugated cardboard and newsprint continued at record levels with the recovery of corrugated totaling 22.5 million short tons. The recovery of newsprint totaled 8.5 million short tons and the corrugated recovery rate is estimated at 73% and the newsprint recovery rate at 67%.”
However, Vento said other data are not as encouraging. Whereas exports for recovered paper in 1997 was 7.5 million tons, an increase of 4.8% over 1996, it was still well below the ten million short tons exported in 1995.
“The current market conditions are not as strong as we had in 1997 nor the first couple of months in 1998,” said Vento. He noted that the corrugated market began to weaken in early April caused by significant downtime by many of the linerboard producers. Also, the brunt of the Asian flu began to hit.
“With this lack of domestic and export demand, buying prices have decreased to the lowest levels we have seen in a number of months,” said Vento. “In some areas, OCC generation has decreased because of low prices and a slowdown in production at manufacturing plants.”
Ilpo Ervasti, a senior consultant with Finland’s Jaakko Poyry, notes that the turmoil in Asia will inevitably decrease pulp and paper production in some countries in the region. He anticipates that recovered paper consumption in Asia will remain at 1997 levels. After this, Ervasti believes the recovered paper demand will grow firmly due to increasing paper production and a higher utilization rate.
Vento emphasizes the next 30 to 45 days will be crucial in determining the trend of the U.S. market through the summer months and leading into the fourth quarter.
“Overseas container rates are the lowest they have been in a long time, but the strong dollar has hurt sales to European customers and the financial crisis in the Far East has certainly not helped exports,” said Vento. “There appears to be more uncertainty in the market today than we have experienced in over a year.”
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An elevated cab is one of several features improving operational efficiency at the Macon County Solid Waste Management agency in North Carolina. When it comes to waste management, efficiency, safety and reliability are priorities driving decisions from day one, according to staff members of the Macon County Solid Waste Management Department in western North Carolina. The agency operates a recycling plant in a facility originally designed to bale incoming materials. More recently, the building has undergone significant transformations centered around one machine: a SENNEBOGEN telehandler (telescopic handler).
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SENNEBOGEN 340G telehandler improves the view in Macon County, NC
An elevated cab is one of several features improving operational efficiency at the Macon County Solid Waste Management agency in North Carolina. When it comes to waste management, efficiency, safety and reliability are priorities driving decisions from day one, according to staff members of the Macon County Solid Waste Management Department in western North Carolina. The agency operates a recycling plant in a facility originally designed to bale incoming materials. More recently, the building has undergone significant transformations centered around one machine: a SENNEBOGEN telehandler (telescopic handler).
NONFERROUS CONCERNS
Those on the nonferrous side of the business shared the same concerns about Asia as did their colleagues in other sectors. Robert Voss of Voss International Ltd., Harrow, United Kingdom, presented a particularly bleak assessment of the marketplace. “It looks as though the second half of this year will be equally difficult for all of us,” said Voss.
Voss predicted that firms in the European Union involved with nonferrous metals will experience very small margins and “no doubt as a result of the difficult times we shall see a number of companies involved in our trade forced into closure. I hope that we can all afford to come to Brussels (the site of the BIR’s fall convention) in October.”
Voss noted firms in the European Union were particularly hard hit by the financial crisis and dramatic downturn in demand from the Pacific Rim nations – notably Korea, China, Malaysia, Indonesia and Japan. This coincided, Voss added, with a shortage of good quality raw material and a downturn in LME prices.
Robert A. Stein, manager, nonferrous metals department, Louis Padnos Iron & Metal Company, Holland, Mich., reported that nonferrous prices are again being affected by factors that have nothing to do with the fundamentals of the business. He believes that the continued interference of banks and commodity funds, particularly on the London Metal Exchange, “adds an unnecessary level of uncertainty to an industry which is unfortunately at the mercy of the whims of institutions who know nothing of our business.”
Stein noted that “with no current relief in site for the Asian economies,” the secondary grades of aluminum scrap will continue to suffer as ingots find their way from Asia to North America, putting pressure on domestic producers and subsequently on scrap prices. On the other hand, Stein reported primary scrap consumers were doing a strong business, which he anticipates will continue, at least for the near-term.
The author is former editor of Recycling Today.
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