China witnessed rapid economic growth a few years before the outbreak of the global financial crisis. "China demand" pushed up the price of scrap metal worldwide, even the theft rate of sewage well covers in London. Changes in the price of scraps are a window through which one can observe changes in economic cycles. Through this window, one can see that the Chinese economy is obviously slowing down.
According to media reports, the price of scraps recently took a plunge in Beijing and some scrap dealers suffered losses because they were unable to have an accurate and timely grasp of the market trends. They thought at first this was just a temporary phenomenon, but now they are worrying about the survival of their business. Industry sources suggest that the price of scrap copper has gone down from Rmb54/kg to Rmb22/kg, stainless steel scrap from Rmb10/kg to Rmb1.2/kg, and old newspapers from Rmb1.4/kg to Rmb1/kg.
A scrap dealer said he had never seen this kind of "collective plunge" in the price of scraps in his long years of experience in this business. The price of cooper, iron, aluminium and paper all dropped in the last month, in some cases by several hundred yuan per tonne, basically a third of the price. Some scrap dealers have sustained losses amounting to Rmb100,000, and the larger their stock in hand, the heavier their loss. “The situation is very bad now, even worse than during the financial tsunami of 2008,” said an industry source. Industry players are ready to take a macro view and believe that the market downturn has a lot to do with the state of the global and national economies.
Like a canary in a coal mine, the waste recycling industry is both the front-end and back-end of industry and plays the role of a barometer for the economy. If the waste recycling industry slows down nationwide, it is a sign that China’s economic downturn is full-fledged. Actually, the sharp falls in the price of scraps all had their omens. Falling prices of cooper, lead, aluminium, zinc and other metals in the futures markets have dragged down the prices of metal scraps.
Due to the uncertainty of the European debt crisis and worries of slackening demands in China, market demand for metals has declined substantially. The sizable stock of copper, lead, aluminium, zinc and other major metals in the market is putting further weight to bear on the price of scrap metals. With the plunge in the price of cooper, iron and other metals in the international futures market, the price of scrap copper and iron also reported sharp falls of over 50%.
