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May 15, 2012

 

Brian Taylor

 

Economists, researchers and analysts assigned to present forecasts, including several who spoke at the recently concluded ISRI (Institute of Scrap Recycling Industries Inc.) 2012 Convention and Exposition, sometimes use the phrase “black swan” event when offering disclaimers attached to extended forecasts.

This ballet metaphor seems to have grown in popularity since the release of the Academy Award-nominated 2010 motion picture of the same name.

The online Jargon Database (www.jargondatabase.com) defines a black swan event as “an extremely rare or unlikely event” or “a rare event that cannot be predicted.”

Those forecasting where the economy is headed certainly deserve such disclaimers, as unfortunately there have been no shortages of black swans swimming into the picture in the past 12 years, ranging from the 9/11 attacks to the tsunami that hit northern Japan. (Whether the U.S. sub-prime mortgage crisis or European debt problems should be regarded as “unpredictable” or simply “ignored” is a debate not to be addressed in this column.)

Despite several black-swan disclaimers, presentations at the ISRI convention, as well as comments made by recyclers in conversation, also yielded some positive insights.

Perhaps foremost among those is that the swelling of the ranks of the middle class in Asia has created an enormous surge in demand for recycled materials.

There are black-swan scenarios that could interrupt and disrupt this demand, but many recyclers and forecasters even offer a disclaimer to this disclaimer. What many have observed is that even if demand for scrap in one region abates, buyers from another region soon step in to take advantage of the price weakness and material availability.

For recyclers in a scrap surplus region like the United States, the biggest underlying problem is finding sufficient scrap to meet demand. This is by no means a small problem—veteran recyclers are quick to point out that scrap acquisition has traditionally been the most intensely competitive part of their business.

But others are quick to point out that the previous 10 years of surging global demand has helped create both an infrastructure and a mindset that has served the recycling industry well.

Many business owners and managers in North America and Asia (as well as economic planners in nations with managed economies) more fully understand the critical role of secondary raw materials in the global economy.

China cannot keep growing at the pace of the previous 10 years. But if the world is going to have a larger middle class using more appliances, more computers, more packaging and more vehicles, it will depend on keeping recycling loops intact to make it happen.