Editor's Focus

Departments - Scrap Industry News

November 15, 2000

The recent state of most recyclable commodity markets has caused hardship for many recyclers and concern for most recycling advocates.

Pricing for some of the recycling industry’s largest volume materials—including ferrous scrap, old corrugated containers (OCC), and aluminum used beverage cans (UBCs)—has been heading down or, in other cases, staying down.

There appear to be some legitimate reasons for short-term (or perhaps even what could be called medium-term) concern. The U.S. economy has enjoyed a record-breaking stretch of growth and prosperity, and there is no reason to think that the existence of a business cycle is now a thing of the past. If any Japanese economists or executives were thinking this heading into the 1990s, they have been disabused of the notion.

Although anyone in a position of power to do so has been attempting to ensure a “soft landing” for the U.S. economy’s eventual slowdown, there is no guarantee that the market is so tightly controlled that there actually is a pilot who can ensure such a safe landing.

Some of the more bearish economists are looking at the depressed state of the commodities markets and seeing a situation that reminds them of the 1920s. In an era when most of the country was enjoying prosperity (and record stock prices), many farmers were unable to squeeze profits from bumper crops of corn and record-setting livestock and dairy production.

Depressed commodity prices aren’t necessarily a harbinger of doom and gloom, however. Oil producers saw the price paid for their product plummet in the 1980s and early 90s, and yet the 1990s were a decade of favorable business conditions for many other industry sectors. (Some would argue there is a logical reverse correlation, but that’s a topic for another essay.)

Whether in the case of 1920s mouths to feed or 1990s energy consumers, one thing should be noted: the pricing slumps occurred despite increased demand for the commodities in question. Despite the best efforts of American SUV drivers and overworked over-the-road haulers to consume impressive amounts of petroleum, petroleum prices stayed low because of the other side of the equation: A generous supply.

Many observers have concluded that recyclers are facing the same situation. Even though short-term domestic cutbacks in steel mill melting rates or secondary paper pulping rates occur, the overall demand trend has been undeniable. Electric Arc Furnace steelmaking has altered the scrap demand landscape over the past three decades, and the steady acceptance of secondary pulp and conversion of mills by forest products companies has brought about a similar demand increase on the paper side.

As impressive as this is, what may be equally unfathomable to a recycling advocate looking forward from the year 1970 has been the establishment of the recycling collection and processing infrastructure.

It is probably safe to say that the number of scrap metal collection bins placed at manufacturing and demolition sites, and the number of shredders, balers and shears now operating would astound an observer zapped forward in time three decades from 1970 to 2000.

Equally astounding would be the proliferation of office and curbside paper collection programs and the placement of OCC balers at retail and warehouse locations in the U.S. and around the world.

As a process, recycling has boomed for the past three decades. A booming process, however, doesn’t translate into boosted profits when supply outdistances demand. Recyclers have done their job so well that at times the impressive collection and processing network they have set up may contribute to their own pricing woes. Like the farmers of the 1920s and the oil producers of the 1990s, recyclers have a waiting market, but not an unlimited one.