A major goal of recycling is to cut the environmental impact of manufacturing and resource exploitation to the minimum, preserving valuable minerals for future generations and reducing energy use that contributes to climate change. It’s easy to get focused on these worthy aims and forget that there are also economic aspects; while many argue that environmental improvements are worth pursuing at any price it can be difficult to make that viewpoint stick with voters, especially when the global economy is still as fragile as it currently is. Families who’re struggling to pay energy bills right now might not be sympathetic to price hikes intended to avoid damage in the future, and hard-pressed businesses will be reluctant to add extra costs when it’s all they can do to stay afloat.
One area of recycling where economic factors are having an impact right now is the market for scrap ferrous metals. The most valuable ferrous scrap is steel, especially high grade stainless, but the key resource that affects prices is iron ore – and right now that’s heading down. Reduced demand from heavy industry, mostly in China, has depressed prices to below $71 per ton, a five year low. This has a serious impact on the cost effectiveness of recycling ferrous scrap. While much of the cost of processing ore into usable iron or steel is in the energy required low ore prices help offset this, especially when more exotic alloys are involved. To preserve the quality of stainless steel careful sorting is needed in the recycling process, and that takes more investment in technology.
The obvious result of low iron prices is a fall in the market value of scrap iron and steel, and this is exactly what we’re seeing now. In fact there’s been a delay, with scrap holding up well for several months while ore dropped, but the connection has now firmly re-established itself and scrap dealers are reporting sharp falls on all grades. Standard shredded steel scrap is now selling for around $320 per ton, with analysts expecting it to keep falling at least to the end of this year. Stainless 304 grade has shed more than $100 and is now selling around the $1,300 point, with the 316 grade down up to $150 at a shade over $2,000. The main driver here is reduced demand and an abundant supply of chromium.
From a recycling point of view the main concern here is that the scrap industry will be less willing to invest in expensive processing equipment when demand for the recovered metal is weak and prices correspondingly low. The raw material – ferrous scrap – is cheaper and likely to fall even more, but the facilities needed to produce high quality steel from it is an inflexible cost. The best long-term solution to this problem is the development of more efficient processes that cut energy costs and make recycling a more economically robust proposition. The benefits of recycling might always make environmental sense, but to promote it we need to make sure it makes financial sense too.