China bans scrap metal

What Now, China?

Recently there has been uproar in the recycling industry and to be candid, we didn’t think this news would have such an effect on the Scrap Metal Industry.  In July, China proposed a new ban at the World Trade Organization (WTO).  Although the ban hasn’t gone into affect, the world is experiencing some significant disruptions. How will this impact the global economy and most importantly, what will it do to the Metals Industry?

What is the “Big Ban”?

According to The Institute of Scrap Metal Recycling Industries (ISRI), there are two important parts to this ban. First and foremost, the proposed ban limits or prohibits 24 different imported materials into China. Most are solid waste, such as paper, plastics, slag, waste wool, ash, cotton, and yarn. The second part of the ban includes a “carried waste” threshold, and this is the part the Metals Industry needs to pay close attention to. China’s proposed draft of the ban includes a 0.03% “carried waste” threshold on all imports into the country. Carried threshold meaning the contaminants and prohibitive materials that are commonly mixed in with recyclables, including scrap metal. Currently, the global standard is 0.05-5.0%.  The ban also mentions a proposed 80% weight requirement on all metal and electrical appliance scrap and the current global standard is a 50% threshold.

scrap metal recycling ban

Why The Ban?

According to China, the ban and the proposed carried waste threshold are in efforts to replace foreign materials with domestically generated material. China claims they want to reform their import system to protect the health of their citizens and environmental interests. To date, Chinese authorities have yet to divulge any specific details.  Many exporters are uncertain whether the ban includes their materials, such as certain plastics, slag, mixed paper.

After the announcement, the WTO requested China release more specific details. In response, China’s Ministry of Environmental Protection has released a draft of changes of some technical specifications. For imported scrap, stricter regulations on impurities, weight requirements for metal and electrical appliance scraps. However, many unanswered questions remain.

metal recycling industry

Recycling Industry – USA

For non-metallics, China’s ban on paper and plastic would affect 18% or $532 million of USA scrap. The scrap trade to China is worth $6.5 billion annually and impacts 150,000 US jobs. Currently, 40% of the USA’s total exported scrap goes to China. The plan would essentially affect all mixed metals, especially scrap products that must be dismantled, such as cable, scrap wires and scrap motors. With that said, the paper, plastics and copper industries have already been experiencing disruptions in their day to day operations for some time now. Although the ban hasn’t gone into effect, Chinese importers report having trouble securing permits.

According to one of B.L. Duke’s copper consumers, “The Chinese’s recycling restrictions have created complete chaos!  We currently have 500 containers stuck in a port held up by Chinese Customs.”  

China accounts for more than half of the world’s total scrap imports and this ban won’t only affect the United States economy but the world economy.

ISRI

ISRI to the Rescue?

After China’s vague announcement at the WTO, ISRI immediately spoke up and voiced their concerns. ISRI has urged China to specify the difference between the term “waste” and “scrap”.

“ISRI is extremely concerned with the reduction of the control requirement for ‘carried waste’ to 0.3% for all commodities,” wrote ISRI President Robin Wiener in the letter. “The application of this standard will effectively result in a ban on the importation of all these commodities. It is simply not possible to achieve such a control level, nor is it possible to even measure it with such accuracy.”

“In the United States, a 50% threshold is used when defining what is considered legitimate scrap metal for recycling. For consistency in the global trade, we would respectfully request that a uniform standard of 50% be used within China as well,” Wiener wrote.

Final Thoughts

Many recycling experts, including ISRI, are very concerned how China can possibly measure 0.03% and place such tight controls on imports. According to the Bureau of International Recycling, restrictions on scrap imports into China will become more and more aggressive as time goes on. Many leaders understand what China is trying to do environmentally, but there needs to be consistent threshold for fair global trade and ISRI plans to fight the ban.

The biggest take away is China’s need to have clearer details and specifications of the ban. In the immediate future, the Metals Industry needs to be alert and keep a close watch on the proposed “quality threshold” specifications.

Scrap Metal Forecast

The Association of Women in the Metal Industries (AWMI) hosted their annual January outlook meeting focusing on the scrap metal forecast for 2017.  Joseph C. Pickard, Chief Economist and Director of Commodities, at the Institute of Scrap Recycling Industries (ISRI) discussed 2016 markets and spoke about some key issues for 2017.  In general, Pickard is on the same page with us at B.L. Duke.  The scrap industry is long overdue for a good year and we believe 2017 is looking bullish.

Politics aside, I think we’re set for an eventful year and there have been recent promises that may shed positive light on our industry.  Some of these promises include reshoring, reducing corporate tax rates, renegotiating trade deals, increasing infrastructure spending, and more.

In terms of bringing back manufacturing to the United States, the 2016 U.S. Manufacturing Purchasing Managers’ Index (PMI) wasn’t positive overall.  However, the last quarter showed improvement and is worth mentioning.   The Institute of Supply Management’s PMI rose to 54.7 in December 2016 and any number above 50 is a strong number.  The new orders index rose by 7.2 points, the largest increase in seven years.  Not only is PMI looking bullish for the United States, but globally as well.Scrap Metal Forecast

With that said, let’s talk about scrap exports and of course we will start with China, a country we watch closely.  First off, U.S. Scrap exports have significantly dropped in the last 5 years.  In 2011, the U.S. exported $11.5 billion of scrap and in 2015 only $6 billion (47% decrease).  The second largest buyer of U.S. scrap is Turkey and they bought 19% less in 2016. One major reason for is Brexit and the large drop in value of the pound as Britain is Turkey’s second largest importer of scrap metal.  Nonetheless, all U.S. scrap metal exports dropped from $32.6 billion in 2011 to $17.5 billion in 2015 for several reasons, especially due to the value of scrap and the strength of the U.S. dollar.  Side note: some notable countries to keep an eye in the near future for scrap exports are Greece, Bangladesh, Mexico, India, and Thailand.

What about steel production domestically?  In 2016, American Iron and Steel Institute (AISI) estimated raw steel production declined by 0.5% from 2015.  As for 2017, AISI has already reported production is up 5.8% as of January 14, 2017 in comparison to beginning of 2016.  Are trade cases already affecting raw steel production domestically? With less imports, is the U.S. making more steel domestically?  AISI estimates U.S. steel imports declined by 15% in 2016.

Scrap Metal Forecast

Overall the FED is predicting a modest growth in GDP over the next 3 to 4 years and a 1.9-2.3% growth in 2017.  With several indicators, I think we will have an overall bullish year in the metals industry.   With the huge scrap price increase in December and January and with February historically being a soft month, we will  have a soft to sideways month.

For more information on scrap metal pricing and market conditions, email info@blduke.com or call 773.778.3000

Scrap Metal Forecast

As we enter the Fall of 2015 the outlook for the scrap market and the metals industry in general is bleak to put it lightly.  The thought was that the scrap pricing collapse that occurred in February would be the bottom of the market and we would slowly regain the loses over the remainder of the year.  Clearly those predictions proved to be dead wrong but why and what can be done moving forward?

As 2015 progressed a series of factors came together to create a “perfect storm.”  The three main factors negatively affecting the industry are the global slowdown, the strength of the US Dollar and simple oversupply and lackluster demand.  The global slowdown led by China has driven the Asian nation to dump cheap, government subsidized finished steel products all over the world.  Not only has this practice sucked any extra demand there may have been out of the US market but it has left the UK Steel Industry fighting for its life.

The US Dollar is the reserve currency for the world and when things are grim across the globe, the value of the dollar increases.  This go-around has been no different.  Only a year ago the Euro-Dollar exchange rate was as high as roughly a $1.40 today it is $1.11.  The fall in the value of the Euro has brought scrap export off of the east coast to a crawl at best.  We cannot assume that the Euro will increase in value anytime soon, it appears as if ECB is set to engage in another round of quantitative easing.  We will continue to see an over-supply of domestic scrap until consistent export resumes.

Fourth quarter 2015 is looking every bit as challenging as third quarter and resembles 2008 depressed markets. Unfortunately, there is no light at the end of the tunnel.  Lou Plucinski, B.L. Duke’s President, was interviewed by the American Metal Market discussing how small yards have in edge in downturns. “B.L. Duke is working hard to set itself apart, including making its business practices transparent.” Plucinski also stated, “We know the stigma scrap metal companies have, and B.L. Duke is truly revolutionizing the industry because we have brought a new level of transparency with customers with groundbreaking software systems that allow customer full access real time.”

Through transparency and consistent communication, we are working with our recycling partners to ensure we can continue to provide great service while navigating through these unprecedented markets.

For a fresh look at your recycling program contact B.L. Duke at 773.778.3000 or info@blduke.com.

Barge-Lou-P-225x300The Midwest scrap market has had more than its fair share of challenges in 2015.  Even though B.L. Duke expects Midwest ferrous scrap prices to rise in June, this does little to restore us to the levels realized in 2014.  With market troubles still weighing heavily on our industry, companies must think outside the box and create opportunities for themselves.  While B.L. Duke is hopeful the fundamentals of our industry will continue to improve, we refuse to sit on our hands and hope for the best.

As May is coming to a conclusion we have turned our attention to June’s scrap pricing and for the first time in 2015 there is positive sentiment.  B.L. Duke expects scrap prices to increase in the range of $10 to $15 per gross ton.  We have heard rumors of even larger jumps, but we do not see anything to substantiate them.  With construction season picking up steam and an impending trade case against foreign steel imports, demand for domestic steel will grow.  A tick up in the East Coast export market should also assist Midwest markets. Even though the East Coast is still slow any material that leaves for foreign ports is seen as a positive for the Midwest market.

Let’s not kid ourselves, the Midwest scrap market and the domestic steel industry have an incredibly long road back to where we would like to be.  The strength of the US dollar appears as if it will continue to be a drag on both industries for the foreseeable future.  The economic situation is Europe will not correct itself quickly enough and the US economy does not look like it can support our industry on its own.

Barge---B.L.-Duke

This is precisely why B.L. Duke continues to seek alternative homes for scrap outside of the Midwest.  While Midwest markets have remained relatively stagnate in 2015, B.L. Duke is taking advantage of our water front facility and selling barge loads of scrap outside Chicago’s market. “It’s a great advantage to be one of only a couple industrial scrap companies that can move barge loads of scrap out of the Midwest market,” states Lou Plucinski, B.L. Duke’s President. “Being in a town as notoriously competitive as Chicago means every efficiency adds to our strength and creates new opportunities.”

Scrap metal forecast

After two consecutive months of falling prices we were hopeful the scrap market would improve with the weather.  Unfortunately, June scrap prices appear to be decreasing once again.  In May, prime grades and shredded scrap decreased around $15 per gross ton. According to the American Metal Market, this decrease was due to “minimal buying programs at two steel mills, an oversupplied shredded market and the absence of firm trading into larger, neighboring markets helping a third Chicago-area producer to systematically lower prices from April’s levels.”

June 2013 was soft-sideways, with cut grades falling around $10 per gross ton.  Ferrous scrap prices in June 2014 are set to fall  by $15 to $20 per gross ton, depending on the commodity. The biggest hit is expected to be seen in shredded scrap, with a decrease of $20.  Both the Scrap Price Bulletin and the American Metal Market expect shredded scrap to fall the most for a variety of reasons. Many sources in the AMM article, Ferrous scrap tags look poised to slide in June, believe shred will decrease because of rise of inventory in dealer yards and less of a demand from mills overall due to planned outages.

In regard to manufacturing, there has been a positive sentiment throughout the industry for a ‘comeback’ in the United States.  This is largely due to more competitive labor, logistic costs and producers wanting to create products closer to consumers. “The Institute for Supply Management said U.S. manufacturing grew at a brisk pace last month,” and reported a manufacturing index of 55.4 for the month of May. The manufacturing index number is created by monitoring production inventories, new orders, supplier deliveries and employment. 

Read more: Dow, S&P Close at Record Highs After Revised Manufacturing Report Sends Stocks Rising 

The 5th Effective issue of June’s American Metal Market is due to be released late this week or early next. As of today, B.L. Duke feels the market won’t be as soft as earlier predicted, but we agree shred will be taking the biggest hit. 

steel heart isolated on a white background

Unlike the prior three months, there is a fair amount of uncertainty regarding February’s scrap market.  Continuing extreme weather conditions as well as lack of export demand have combined to make February’s scrap pricing difficult to predict.

It goes without saying that this winter has been absolutely horrendous in the Midwest.  The Chicago area is having one of the coldest winters on record, with average temperatures since December 1st at 20.3 degrees, the 12th lowest since recordkeeping began in 1872, according to The Chicago Tribune, “Chicago bracing for second deep-freeze in a month.”  The low temperatures have only added to the misery that has been Chicago’s winter.  We have also experienced the “third snowiest January on record,” states Accuweather.  While this may not affect prime grades of scrap, cut grades and shred will be in short supply.

Export demand and pricing has been falling over the last few weeks.  Two West Coast bulk ferrous scrap sales to South Korea have sent U.S. export prices down, a Korean participant said.  There is no construction in Korea and no demand for finished manufactured products, as claimed by American Metal Market (AMM), ” US scrap export prices slide again.”  East Coast exports have fared equally poorly and have begun offering tons inland.  The AMM article, “US bulk scrap sale affirms bearish market,” says that “exporters are likely to continue gauging domestic mills’ interest in their scrap as Turkey remains reticent on bulk orders and container exports have also dropped significantly.”

Is the lack of export demand or the extreme weather going to win out in regard to February scrap pricing?  “I feel there has not been enough emphasis put on how negatively the weather has affected scrap supplies,” believes B.L. Duke’s President, Lou Plucinski.  “Earlier speculations of drops of $20 – $30 seem unrealistic considering low mill inventories and the lack of obsolete grades moving due to the weather.  I will be very curious to see if mills begin using more prime grades considering the pricing anomaly,” adds Plucinski.

I happen to agree with his opinion.  It has been very difficult to move scrap whether by truck, rail, or barge given the weather.  Even if the East Coast exporters absolutely had to sell in the Midwest they would find it difficult, logistically speaking, if this weather persists.  At the end of the day, I believe that prices will remain at roughly the same level as January or slightly softer.  Then again, sometimes you can’t see the forest or the trees.

Santa snowman lifting dumbellsThe scrap market holiday cheer that began with price increases in November and December will continue into the new year with a fair amount of strength.  A much improved manufacturing sector coupled with a tight supply of scrap metal will come together to push prices up another $5 to $15 per gross ton in January, depending on the commodity.

The U.S. manufacturing sector which has been trying to gain momentum for most of 2013 may finally be finding its footing.  November durable goods orders increased significantly.  According to a nbcnews.com article, Manufacturing Outlook Brightens as Durable Goods Orders Surgedurable goods orders jumped 3.5% which outpaced economists’ expectations.  Durable goods orders are a leading indicator for the health of the overall U.S. economy.  When orders trend up, the GDP is almost certain to follow.

Although the manufacturing sector is improving, the scrap supply continues to tighten.  As was the case in December, while prime grades supply is strong, cut grades and shred are hard to come by.  “Heavy melt will continue to be in very short supply.  The spread between prime and shredded will continue to compress to where we could see the two grades on par or even inversed,” states the American Metal Market article, Prime, Shred Price Gap Seen Shrinking Further.  The same article goes on to discuss the weather, which has been horrendous for the better part of a month and does not appear to be improving anytime soon.  “Supply is weak and this is the worst time to try and get material.  It is just not available.  Ever work outside when it is single-digit temps?” one Pittsburgh scrap processor asked.

“All the fundamentals are in place to have a strong first quarter of 2014,”  says, President of B.L. Duke, Lou Plucinski.  “If export demand picks up, the Midwest will have a robust start to the year.”

For additional information or any questions regarding scrap metal pricing, please contact us at B.L. Duke.

Molten hot steel is pouring - Industrial metallurgyWhat can we expect to see in the scrap markets in November and throughout 2014? Hopefully something positive! From September to October 2013, we experienced relatively flat markets. October’s trading started off mostly unchanged but ended with a slight uptick in obsolete grades from a late push for scrap. No. 1 Heavy Melt settled at $345 per gross ton in October compared to $342 per gross ton in Chicago’s September markets. However, No. 1 Bundles remained unchanged from September to October.

Several indicators are forecasting an increase in pricing for November as well as throughout most of 2014. According to an American Metal Market article, “Midwest ferrous scrap prices expected to increase up to $50 per gross ton over the course of the winter, with November likely to kick-start the push for higher prices.” Indicators pointing to a strong November and December scrap market include a tight scrap supply, a stronger demand from the mills, growth in the manufacturing sector and an increase in export prices. Several buyers agreed and anticipate a $10 to $20 per gross ton rise in prices in November, and a continued increase seen throughout the rest of 2013.

In 2014, U.S. scrap consumption will increase 7 percent, reaching 64 million tonnes according to the American Metal Market. The main reason for this forecast is based on a lesser need for crude steel to make new finished steel products. There are two types of processes used to produce steel according to www.steel.org, the Basic Oxygen Furnace (BOF) and the Electric Arc Furnace (EAF). EAFs use 100% recycled steel to produce new steel and make up 40% of today’s steelmaking processes in the U.S. This will help lead to an increase in demand for scrap metals.

“U.S. scrap consumption will increase at a faster pace than crude steel output next year due to a higher capacity utilization rates at scrap-intensive EF steel mills” (also know as EAF steel mills). Due to the fact that technology is improving in the steelmaking process, less and less crude steel is required to make new steel.

The American Metal Market recently released another article “US steel market outlook bright for 2014,” stating the World Steel Association released a short-range outlook for 2014 and has forecasted that steel use in the U.S. will increase to 99.8 million tonnes from an expected 96.9 million tonnes. Director-general, Edwin Basson said, “In steel terms, the United States is increasingly attractive to develop new steelmaking capacity, if you were so inclined to, because energy is cheap and it is a net importing market,” he said. “From that perspective, the U.S. today has very exciting opportunities into the future.”

We anticipate an increase in pricing for November’s Chicago scrap market. Lou Plucinski, President of B.L. Duke states, “After what has been a lackluster year for scrap prices, it’s exciting to finally have a silver lining going into 2014.”

For more information or any questions regarding scrap metal pricing, please contact us at B.L. Duke today.

Red-Red-LineIn early May 2013, B.L. Duke was contracted to recycle the old Chicago CTA Red Line. B.L. Duke was heavily involved in the beginning phases of the Red Line Reconstruction project. During the demolition phase, not only did B.L. Duke complete their scope of the project on time and on budget, but also reused and recycled every part of the old rail system. The steel rail components were recycled into new steel and the old wooden ties were ground and used for fuel in power plants.

According to the Chicago RedEye, the Red Line was shut on down on May 19th, 2013 and officially reopened this past Sunday, October 20th at 4:00AM. Now that the project is finished the Red Line operates at 55mph instead of 15mph in slow zones – up to a 20 minute faster commute between 95th/Dan Ryan and Roosevelt. A commuter, Aubrey Jones, told the Chicago Tribune “her commute took 20 minutes on Monday, down from 35 minutes before construction.”

Red Line Reconstruction Recap

  • 154 Days: the Red Line South was closed to complete the Reconstruction Project

  • 7,797,460 Lbs: of new rail was needed to replace the old rail

  • 720,000,000 Lbs: of old material was excavated at the Red Line

  • 3 Stations: received elevators, making all CTA stations south of Roosevelt Road accessible for riders with disabilities

  • 100%: of all slow zones have now been removed during reconstruction

  • $425 Million: was spent on the largest reconstruction project in CTA history

Please contact us at B.L. Duke today for more information on how we can help your company or municipality recycle.

different autumn leaves, multicolored background autumn theme

If you have been hoping that September’s scrap market would heat up like the recent weather trend in the Midwest, you are going to be disappointed.  At B.L. Duke we are expecting September’s pricing movement to be soft sideways.  When we forecast the market to be soft sideways we expect prices to remain relatively unchanged with the possibility of a few ferrous commodities contracting.

Let’s first take a look at the positive aspects affecting our industry.  In recent weeks it seems the the global economy has made a turn for the better.  Purchasing Managers Indices (PMI)  were released for the U.S., China and the Eurozone.  According to a www.globalpost.com article, the U.S. PMI increased to 53.9 and the Eurozone PMI increased to 51.7 which is a 26-month high.  Most important however is China.  The Chinese PMI hit a four-month high of 50.1, which suggests China’s economic slowdown is possibly coming to an end.  What makes this news so exciting is that PMI is not only a great indicator for the manufacturing sector but also the economy as a whole.  On the export side, an American Metal Market article confirmed that ferrous export prices have held while exporters wait for higher prices, “There is not much going on as West Coast suppliers try to push prices up by $10 to $15.  More demand is coming back and Japan exports aren’t widely available at the moment.”

Unfortunately, not all news has been good.  In the last couple of days two economic indicators have been released that throw up red flags.  On Monday, August 26th durable goods numbers were distributed.  A Wall Street Journal article stated, “A key gauge of business spending – non-defense capital goods orders, excluding aircraft – fell 3.3% in July after rising for five straight months.”  In the same article Cliff Waldman, senior economist for the Manufactures Alliance for Productivity and Innovation, made a great point.  “Such activity points to a defensive mentality on capital spending, doing only what is necessary to maintain the current level of growth but not operating with the type of aggressive entrepreneurial mentality that often underlies strong periods of U.S. economic performance.”  This morning we received a second dose of negative news.  The Thomson Reuters/University of Michigan‘s index of consumer sentiment fell from a six-year high of 85.1 in July to 82.1 in August.

Given the mixed economic news as of late it is B.L. Duke’s feeling that Chicago area scrap prices will remain somewhat flat.  It is my personal belief that the prime grades will remain unchanged, with the cut grades and shreddable prices retreating slightly.