Of late, Supply Chain Matters has highlighted new industry supply chain challenges related the current high value of the U.S. dollar in relation to other foreign currencies. That challenge now extends to the flow of recycled materials emanating from the United States to other geographic regions.
The Wall Street Journal reports that for sellers of scrap metal, used paperboard and other recycled waste, headwinds are more described as a hurricane resulting in a current glut of scrap materials. (paid subscription required). The WSJ cites data from a unit of McGraw Financial indicating that prices of shredded scrap steel have plunged 18 percent thus far this year, and our down an overall 41 percent since 2012. Likewise, the price of used corrugated cardboard has fallen 27 percent this year. Noted is that Turkey, whose steel mills had been a able buyer of U.S. based scrap, have been buying more from Russia and other sources. China’s demand is also reported as having slowed dramatically. One beneficiary of the current slump is reported to be U.S. based Nucor, which makes most of its steel from melted scrap. Tht could provide Nucor the opportunity to move up the supply chain into scrap processing.
Recycled materials shipped from the U.S. to other regions were able to take advantage of available surplus capacity on container ships. With the current economics fueled by the higher value of the dollar, scrap materials inventories are building across U.S. distributors. Further, the cost of municipal waste collection contracts are often offset by the value of the scrap and recycled materials that are sold. The economics of that waste stream are now subject to disruption and potentially added costs for U.S. cities and towns.