A North American economy that
has had difficulty gaining traction was a major topic of
conversation at the Institute of Scrap Recycling
Industries annual convention and exposition in Orlando,
Fla., in April.
Timothy Kneen, senior vice
president of wealth management and senior institutional
consultant at UBS Financial Services, described the global
economy as a tricycle during a Spotlight on the
Economy session. The front wheel ... the engine
that is driving the world right now, is the United States.
Its the engine that will pull everything along behind it.
We would argue the back two wheels of the tricycle right now
are China and Europe, and theyre looking awfully wobbly
Scrap iron and steel dealers,
brokers and buyers, who seemed to be in a decided minority
among large contingents of nonferrous, paper, rubber and
electronic waste attendees, werent overly optimistic
about their sector through the summer, with buyers reporting
weak order books through July. Its going to be a
long, hot summer, one buyer said.
Brokers and dealers are banking
on the supply side to prop up the market. The only thing
that could keep this market from outright collapsing, one
East Coast dealer said, is the simple fact that there is
Another East Coast dealer
sitting in on a ferrous scrap session echoed those sentiments.
The market could go down again in May, he said,
but it could turn around real fast because of the supply
situation. If theres any uptick in demand in this market,
this thing could get touchy real quick.
Some conference attendees were
looking for new business opportunities. A Canadian broker
emerging from a seminar on electronic waste said his company
wanted to learn all it could about recyclings newest
sector, since dealers and peddlers increasingly have sought a
place to sell electronic waste, along with ferrous and
nonferrous scrap. If we dont take it, theyll
find somebody who will, he said.
Sachin Shivaram, general manager
of metallics purchasing at Severstal North America Inc.,
Dearborn, Mich., raised some eyebrows when he told the ferrous
scrap session that the Russian-owned steelmaker plans to
abandon the traditional buying pattern of establishing a market
at the beginning of each month. We buy scrap 30 days a
month, said Shivaram, who is responsible for buying 3.5
million tons of scrap and iron annually for Severstal NAs
mills in Dearborn, Mich., and Columbus, Miss. It is a
vibrant, dynamic market beyond what is going on at the
beginning of the month. ... There is value in having more data
points. A two-day buy period is not enough time to make good
decisions. It is archaic that our market is that way. We want
to talk to you at mid-month, and thats not because we are
desperate for scrap.
Shivaram also questioned whether
the boom in direct-reduced iron (DRI) production will lead to
overcapacity. Were somewhat skeptical of DRI,
he said. We see it as a great opportunity to buy more
For those in the ferrous scrap
business, one of the hottest topic at the ISRI convention was
the export market, particularly China. The Chinese became a
leading destination for U.S. ferrous scrap in the earlier part
of the 21st Century before sharply cutting back purchases last
In a session on emerging
markets, David W. Chiao, vice president of Uni-All Group Ltd.,
Atlanta, told a capacity crowd that it has been 15 years since
the 1998 ISRI Convention in Orlando in which China was first
identified as an emerging market for U.S. ferrous, nonferrous,
paper and plastic scrap. Now, I believe everyone in this
room is directly or indirectly supplying China scrap metals,
waste paper or scrap plastics, he said.
Chiao broke his analysis of the
past 15 years in China into three five-year segments:
¥ From 1998 to 2003,
China was beginning to open for business, he said. The
government opened scrap-processing zones to facilitate the
import of scrap, and the countrys growth rate was 6 to 8
¥ The 2004-08 period
coincided with the severe acute respiratory syndrome (SARS)
epidemic, the Beijing Olympics and the economy running a
marathon at a 100-meter-dash speed. Real estate prices
doubled and tripled and doubled and tripled again, and every
piece of scrap shipped to China was profitable; even the rocks
contained in scrap steel had a value, since they could be used
on highway projects.
¥ The latest period,
2009 to 2013, was ushered in by the worldwide economic
collapse. China began to contend with slower growth, growing
environmental problems and the increasing dichotomy between
rural and urban China.
Chiao expects environmental
issues to be a continuing government priority, which is leading
to much more stringent inspection of imports of ferrous and
nonferrous scrap cargoes, a growing concern for U.S. exporters.
He also expects labor costs to continue to increase in China to
keep up with the cost of living, and noted that the
countrys social burden is advancing, with many young
workers now helping to subsidize the living expenses of both
parents and grandparents. The slower speed of growth is
inevitable in China, Chiao said.
Interest in Turkey as an export
destination was almost as keen at the ISRI convention as
interest in China.
Turkey has emerged as the No. 1
buyer of U.S. ferrous scrap exports during the past five years,
followed closely by China. Turkey buys about 21.5 million
tonnes of ferrous scrap annually, or slightly more than 20
percent of global exports, sourcing around 27 percent of its
ferrous scrap needs from the United States.
There is a whole
infrastructure out there that has to support the export
market, one East Coast broker said.