Recyclers are struggling with low metals prices as some economists warn a commodities “supercycle” may be ending, which means 15 to 20 years of rising prices will now be followed by a similar period of downturn.
The end of the US quantitative easing programme and a slowdown in demand from China have pushed commodities prices down, with copper at its lowest point for a number of years. At the end of June the price of copper was listed on the London Metals Exchange at $6,750 per tonne, lower than the previous slump in 2011.
Philip Moore, director of Staffordshire-based Moores Metals said the long-term outlook for prices looked bleak. He told MRW: “I can’t see any reason why the market will return in the medium term. On the speculative side it doesn’t sound good because of the tapering off of quantitative easing, on the supply side it doesn’t sound good because there’s too much copper in stockpiles and on the demand side you’ve got the market in China which almost certainly is not going to come back for a year.”
“In some time to come we’ll get mothballing of mines and that sort of thing and it’ll turn around again.”
But Moore said trading in volume was continuing unabated, and that he was aware of only one trader that was stockpiling copper. “On the copper side it isn’t price dictated, tradesmen and businesses bring in their scrap anyway. I don’t think that’s affected by price. Steel is a different matter.”
Dean Overton, managing director of fridge and WEEE specialists Overton Recycling, warned gate fees may have to be reintroduced because of low commodity prices.
He said: “Everything is very tight at the moment. If we don’t get our money from selling our metals, we will have to bring back gate fees.
“Once upon a time gate fees were in order and material prices were lower. Prices moved up and gate fees disappeared. But I can see their re-introduction, particularly on marginal items such as fridge and TV recycling.
“I saw these conditions before 12 years ago. Prices were down at this level then, and we charged £10-15 a fridge to process them. I can see that sort of level of fee coming back again.”
Overton added that low prices were leading to a shortfall from his dealings with WEEE compliance schemes. In 2008 a slump in metals lead to producers of electrical and electronic equipment to pay more to their producer compliance schemes as recyclers were not earning enough from scrap.
But Overton said: “The compliance schemes, who give us an awful lot of business, are very resistant to any change in rebates, and that’s not very helpful.
“The rebate is what we pay the compliance schemes to get hold of WEEE. As prices go down we have less and less for rebates. That’s squeezing us even further.
“The compliance schemes will have to understand where the market forces are moving at the moment. They want the best value for their customers, the electrical producers. As far as we’re concerned, they’re very reticent about understanding the need to reflect the fall in materials prices.
“They should wake up and smell the coffee. The reality is if we don’t earn the money from the materials then we have to earn the money from gate fees, or reduce rebate.”
“With regard to other B2B sources and traders, there possibly is a better understanding of where market conditions are, but even that is tight.
“This has been brought about by the US announcing they were going to pull out of their quantitative easing programme. The hope was the buoyancy of the world economy would keep prices high, but at the moment there isn’t that much good news.”
One major WEEE compliance scheme told MRW there was very little that could be done about the market economies that drive the treatment sector and that “prices will be what the prices will be”.
Mark Schofield, director of JB Schofield metal recyclers in Yorkshire, said: “Talking within the trade, I’ve never known as many people say how quiet it is, how fed up they are and how difficult it is to make money.
“The phrase I hear constantly is ‘treading water’. People are happy if they’re paying wages and breaking even.
“Most of our trade is merchant-to-merchant, it seems to be the story up and down the country.
“At the moment I keep a lot of iron and steel in stock, because in my view it’s a long-term investment and I’d rather have that than the money in the bank, but the day-to-day trading on copper, cable, motors, it’s in today, out tomorrow.
“Take the profit, however small because the market’s so volatile. There’s no good news out there, politically.”