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Will Plunged Metal Scrap Be Recovered?

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by - 3/9/2016 5264 Views

A Hopeful U-Turn!

A most valuable industry is drowned into peril as the life is slowly squeezed from it by slowing demand and a flood of cheap imports as the government is a mere onlooker. The plunging oil prices and slack growth in China have led to a decline in the prices buyers are willing to pay for recycled scrap paper, plastic, cardboard and metal. Citing examples of the decline in prices for recycled materials, Seth Goodman, CEO of Northstar Recycling in East Longmeadow said cardboard was selling for $170 to $180 a ton two or three years ago. Now it is $80 a ton. The cardboard goes to mills, many of them overseas, which grind the fiber back into pulp and to make more cardboard.

Polyethylene stretch film, a material similar to kitchen plastic wrap used to secure goods on shipping pallets, was selling for 22 cents a pound a year ago. Now it's selling for 10 cents a pound, Goodman said.

The price of metals has "completely dropped" as well, Goodman said, adding that copper was so much in demand a few years ago that thieves targeted construction sites and buildings. Five years ago scrap copper sold for $4 to $6 a pound. Today, it goes for $2.80 a pound. The materials are still going for a better price than throwing them in the trash."


 

Reasons for declines

"It's a global market," Goodman said of the supply and demand for recycled materials. "The biggest single reason for the decline in prices is a slowing in the rate of growth in China. They are not constructing infrastructure like they used to and are not buying construction materials to ignite the intended growth."

Low oil prices also played a major role. Two years ago, the price of a barrel of crude oil was over $100. That price dipped below $50 in fall 2015, and this week the price has hovered around $30. Most plastics are made of oil or natural gas. When oil prices fall, virgin material gets cheaper and manufacturers are tempted to produce more new plastic and use less recycled material.

Greg Cooper, division director of Business Compliance and Recycling at the Massachusetts Department of Environmental Protection, said cheaper oil has another impact that makes recycled metal less valuable. An advantage of using scrap metal in manufacturing is that it is more energy-efficient. Simply put, it takes less energy to melt a scrap metal can than it takes to make steel from ore, he said. Falling oil prices, though, mean that using ore in the production of steel becomes more cost-effective.

Goodman said it is possible for a business to try and make money by storing the scrap metal in hopes that prices rebound. "But it's hard; it costs money to store all of this material and there is always more coming in," he said.

 

Impacts of lower prices

For cities and towns, accepting a lower price for recycled materials is still preferable to the alternative: sending those materials to the dump.


Dumping material in landfill costs money, Goodman noted. And according to the state of Massachusetts, tipping fees at landfills range from between $60 to $80 a ton, depending on the contract the customer has with the landfill.

With environmentalism now a part of the brand identity at many companies, Goodman said the manufacturers and warehouse and distribution points he brokers recycling services for have promised their customers and suppliers that they will recycle.

"They have sustainability goals that they are fully committed to that are driven from the top down," he said. Even with low prices for recyclables, getting rid of the stuff at a scrap dealer beats paying to dump it at a landfill.

"Municipalities still want residents to actively recycle," Cooper said. "The materials are still going for a better price than throwing them in the trash." Cooper said low prices for recycled commodities don't impact municipalities and their bottom lines very much. Most have contracts with waste handlers, like the Springfield Materials Recycling Facility, that put the emphasis on making sure the towns and cities have a place to get rid of recycled materials.

There’s spring in March for Steel, but can it last?

Ardent observers of the steel trade press might have concluded the month of March came in like a lion. Among the top five stories, four were pricing stories and all were positive, a noticeable change from many previous steel market headlines containing such phrases as “gloom” and “doom”.

The positive news for steel that launched March had an international flair: Asia rebar prices on the rise; US sheet prices going up $30/st; European rebar prices possibly at the bottom (nowhere to go but up!); China’s plate export prices on an upward trend.

 

  • Spring-like weather is returning in the Northern Hemisphere, ushering in construction projects.
  • And finally, markets around the globe have been lackluster for so long, price increases — some from historically low levels — are long overdue. Weak business has allowed steel buyers to let inventories run down and some replenishment (maybe lots of it) is now in order.


Unfortunately for steel, the impact of these positive trends may be only temporary and steel buyers need to be pretty sure price increases can be sustained before they take the plunge and make substantial orders at the higher prices. This is especially true for service centers and distributors who must wait for their steel — with mill delivery lead times often stretching a month or more — and then hope that the price strength is still there and growing so they can make a resale profit.

In other words, if March goes out like a lamb, any rites-of-spring exuberance could be punished. Beware the Ides of March!

Category : Metal

Tags : Scrap Metal, Scrap Metal Market, Scrap Metal Trend, Global Scrap Metal Trend


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About Georgy Abraham

As the bright morning of 28th May dawned in the year 1972, in the fulfillment of time according to the plan & will of Almighty Godbrought me forth into this world and I was brought up & educated in Orissa. My parents provided me with the best of education in an English medium school with high standa .... more info

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