JANUARY 2009

ON TOPIC


The current status of non-ferrous metals

—Randy Goodman

With the price of non-ferrous metals declining rapidly in the last couple months, as well as the demand, the scrap metal industry is being affected from top to bottom.

To learn more about the current market and where it may be heading, American Recycler recently spoke with Randy Goodman, the chairman of ISRI’s nonferrous division.

Why have prices for various scrap metals fallen between 30 and 70 percent and how has that affected demand for those materials?

Goodman: As the first link in the manufacturing chain, scrap recyclers are affected by manufacturing decline - indeed, scrap has often been a leading indicator for United States economic activity because basic materials manufacturers are often the first to reduce their purchases as the economy slows down and the first to start laying in inventory as the economy regains strength.

Scrap prices saw an unprecedented crash during an incredibly short period. Since August 2008, copper prices declined nearly 52 percent, aluminum declined 35 percent, and steel declined nearly 85 percent. Never before has the decline in prices or demand been so sudden or severe across the entire United States or global scrap recycling industry.

When do you expect prices to bottom out and how long will it take for the values to rise again? Will the increases be incremental or dramatic?

Goodman: The disruption in the supply chain for scrap materials will be prolonged by this economic contraction for many more months since scrap producers will not generate significant amounts of scrap. Collection of obsolete scrap for sale to scrap processors will also dwindle as people hold off replacing old products with new ones.

Moreover, scrap processors already plagued with significant inventories, purchased at high prices, will not be anxious to accumulate more scrap with few if any orders likely in the near term. As a result, the supply chain for scrap is broken and now will only recuperate many months after manufacturing production recovers.

That being said, I truly believe that it is not an issue of “whether it will return” but rather “when it will return.”

Can more be done to ensure that more scrap metal can be recovered and will the drop in scrap values affect salvage operations, be they from C&D or industrial operations?

Goodman: I think it is safe to say that businesses are in the business of making money and as the value of scrap falls, the economics of bringing costly scrap to the marketplace becomes unprofitable. There are certain projects in the pipeline that will continue and some that will be put off until the economy gets better.

How will the decline in automobile production affect the demand for scrap metals domestically and overall, what is your take on global demand for scrap metals?

Goodman: Auto production has been rumored to have dropped from 17 million units to 12 million units in 2008. This is going to have a huge demand impact of both ferrous and nonferrous scrap demands in the United States and around the world.

Is the scrap industry seeking legislative and regulatory changes from the federal and state governments? What would your immediate priorities be in terms of legislation and regulations?

Goodman: We have not heard of any such legislative package and ISRI has not been seeking any specific package at this time. The best we could hope for is an economic stimulus package to get our economy rolling again, to prime the pump again on the demand side.