An article of interest... hoping CMA have good contingencies in...

An article of interest... hoping CMA have good contingencies in place until the price picks up. Looks like the Asian buyers are not honouring price contracts either... Cheers

Scrap metal market in crisis
03-11-2008

Metals recyclers have revealed that uncertainty over markets for recovered metals is filtering back through the entire supply chain, with reports of smaller scrap yards being forced to close their doors and exported metals being sold at dramatically reduced prices.

Prices for both ferrous and non-ferrous metals have fallen dramatically since reaching historically high levels this summer, as they have been hit by a drop in demand from the ailing automotive and construction sectors.




While metal recyclers have confirmed they are still buying materials, they are finding it hard to sell it overseas
Speaking to letsrecycle.com this morning, one metal recycler confirmed that: "It's very difficult to sell, currently the Asian and Chinese markets are closed; they're even sending ships back."

And, another in the sector explained that "a lot of the export markets are buying in very little" and added that "prices are very, very low".

Another merchant revealed that a metal recycling firm based in the south of England had sent one million tonnes of scrap to China but that, halfway through the journey, the buyer had halved their offer for the metals.

However, due to the costs of demurrage and bringing the materials back, they decided to continue with the export of the metals at a reduced price.

The sector is also awash with rumours of some scrap metal yards being forced to close their doors, with the West Midlands believed to be particularly affected, and one metal recycler said that, for their firm, "it's a case of tightening your belts and cutting back on overtime".

Yards have confirmed that they are still buying in metals, but the uncertainty over demand and drops in prices are hitting the flow of metals from collection to reprocessing.

"We do still want it," one yard said. "But with the fall in ferrous prices, people don't want to bring it in - some people have taken the view that they're not selling."

And, another explained that "as a steel buyer, falling markets are often a buying opportunity, but you have to think about whether you're going to be able to sell it", adding that problems with securing finance from banks at favourable rates in the current financial climate to buy in metals offered an "added complexity".

One metals recycler said that the difficulties with selling on metals meant the only option was to "rack it and stack it" until the market picked up.

Looking at why the sector had been hit so badly, one metal recycler speculated that it could be tied into the strength of prices and demand over the last few years without any major, prolonged down periods before now.

"What we've had in the last eight years is eight strong years, with added demand from China and India and strong worldwide demand from elsewhere - it's almost like we've missed out one of the troughs," they said.

Commenting on future prospects for the sector, one yard said: "There's no light at the end of the tunnel, it's a commodity, so it will bounce back, but it's impossible to tell when."

The impact of the slowdown was acknowledged last month by metals recycling giant EMR when it issued a statement in reponse to rumours and speculation on its current position (see letsrecycle.com story).

Speaking to letsrecycle.com today, Lindsay Millington, director general of the British Metals Recycling Association, commented: "Obviously it's a time of stress for large and small companies alike, as a result we're redoubling our efforts to persuade government to reduce the regulatory burden on the sector."

"They need all the freedom they can get at the moment," she added.

Contracts
In a bid to promote confidence in deals for recovered metals, the Bureau for International Recycling has issued a statement calling for firms to honour their contractual arrangements.

It said: "Recent conditions in commodities and financial markets have served to create circumstances under which a broad range of our members have been negatively impacted through various forms of lack of contractual performance.

"BIR encourages its members and their trading partners to engage in business within the moral and ethical guidelines, which form the very basis of the trust with which the recycling industry has transacted its business for so many years.

"Whilst BIR is not legally empowered to participate in any commercial matters, it urges suppliers and customers to fulfil their business obligations in accordance with good business ethics and to exercise appropriate and prudent diligence," it added.