Facing the scrapheap challenge

In countries experiencing recession, scrap is one of the few industries where demand is outstripping supply. As a general rule of thumb, people tend to avoid throwing away items that they can’t afford to replace.

But for many people, including the reporters of the Financial Times, it took a Category 2 storm to reveal how valuable scrap metal is. As kettles, radiators and even new cars were trashed by Hurricane Sandy, there was a temporary boost to the market.

But western countries are experiencing a scrap shortage.

While China and the EU continue to increase the amount of scrap steel they use, junkyards are running low in the US, which is historically the world’s most wasteful country, and therefore the most prolific scrap supplier. This is despite the fact that 2011 saw a new record set for the amount of scrap steel being used as a raw material in steelmaking.

Prices soar

Prices of scrap iron and steel in the US have soared since the financial crisis, with merchants having to offer customers more and more money for unwanted metals.

And since 2011, the price of scrap steel has been rising relative to that of iron ore, which has incentivised mining rather than recycling.

According to commodities researchers, the flow of wasted metal from a single storm won’t be enough to revive the market.

“One of the under-the-radar stories continues to be the lack of scrap availability in global markets,” Colin Hamilton, head of commodities research at Macquarie, told the FT. “In both steel and copper, lower developed-world industrial output has impacted global trade flows.”