US scrap firms hit by economic ‘hurricane’

United States – US companies, and scrap metal businesses in particular, have been caught up in the ‘hurricane’ of a strong dollar and a slowing Chinese economy, according to a report in the Wall Street Journal.

US exports of scrap materials are said to have fallen by 36% since peaking at US$ 32.6 billion in 2011. The country’s overseas shipments of scrap and waste amounted to US$ 21 billion in 2014 compared to US$ 24 billion in the previous year. It is claimed that the strength of the dollar has aggravated a downtrend in demand from foreign markets, notably China and Turkey.

Prices of shredded scrap have plunged around 18% so far this year and are down 41% since early 2012 while the average price for used corrugated cardboard has fallen 27% in the past year to US$ 77 a tonne. 

Another concern is that an increasing number of manufacturers are opting to reduce vehicle weights to improve fuel economy such that new models contain less steel, argues Randy Castriota, owner of Castriota Metals & Recycling in Pittsburgh. Cars also stay on the road and therefore out of the ‘scrap pool’ for longer.

Joe Pickard, chief economist and director of commodities at the US Institute of Scrap Recycling Industries, points out that ‘things seem to have stabilised a little’ after the steep drop in scrap prices earlier this year. But he stresses that a recovery hinges on a pick-up in currently ‘sluggish’ global manufacturing.