1. What’s Driving Domestic and Global Demand for Scrap Metal Southeast Recycling Development Council 2017 Fall Forum November 9, 2017 Asheville, NC Joseph C. Pickard Chief Economist and Director of Commodities Institute of Scrap Recycling Industries, Inc.

2. Scrap is Not Waste: Snapshot of U.S. Recycling

3. Economic Drivers: Elevated Consumer Sentiment
Stocks are at record highs, headline unemployment rates are low, GDP growth in picking up and inflation expectations are in check, giving a boost to consumer confidence.

4. Record Stock Levels, Low Unemployment, Rising Economic and Wage Growth

5. But Housing Prices Rising Faster Than Income

6. Hurricanes Gave a Big Boost to LV Sales

7. CEOs Are Also Optimistic
Source: Business Roundtable

8. And Business Investment Is Recovering…

9. Manufacturing PMI Still in Expansionary Territory

10. U.S. Recycling and U.S. Manufacturing Are Closely Connected

11. Key Recycling Driver: Prices

12. Per Unit Prices Vary Widely by Scrap Commodity
Prices vary widely by commodity: aluminum is trading at more than $2,000 per metric ton today, while recovered paper & fiber prices for many grades have fallen to less than $100 per ton.
Scrap recyclers are price takers.
For recycled commodities with relatively low per unit prices, transportation costs become increasingly important and impact regional recycling viability.
When prices fall sufficiently low, the incentives to recycle decline and more material can be sent to landfills.
Failure to recover these materials have significant environmental and economic consequences.

13. Key Drivers: Transportation Issues
Shortages of truck drivers remains a top industry concern.
According to FTR Transportation Intelligence, Hurricane Harvey “strongly affected” over 7% of U.S. trucking.
Meanwhile, consolidation continues in the chassis market.
American Shipper reports that “Direct ChassisLink, Inc. (DCLI) has agreed to acquire the fleet of rival TRAC Intermodal’s 72,000 domestic chassis, a major consolidation within the chassis leasing market.

14. Transportation Issues: U.S. Intermodal Shipments Hit Record in October

15. Oil Prices Climbing Higher
Oil prices hit their highest levels since July 2015 early on Monday as markets tightened, while Saudi Arabia’s crown prince cemented his power over the weekend through an anti-corruption crackdown that included high profile arrests.” The likelihood of extended OPEC production cuts amid falling U.S. oil rig counts have also been supportive.

16. Metal Market Drivers and Outlook

17. Year-to-Date U.S. Steel Production
According to AISI, adjusted year-to-date production through November 4, 2017 was 76,474,000 net tons, at a capability utilization rate of 74.6 percent. That is up 3.9 percent from the 73,583,000 net tons during the same period last year, when the capability utilization rate was 71.1 percent.

18. U.S. Ferrous Scrap Exports Up 22% YTD

19. Fe Scrap Exports to Turkey Jump in Sep

20. While The Turkish Lira Continues to Sink…

21. Fe Scrap Imports from Canada Up ~27 percent

22. Worldsteel Only Sees 1. 3% Growth in Global Steel Demand in 2017, 0
Worldsteel Only Sees 1.3% Growth in Global Steel Demand in 2017, 0.9% in 2018

23. YTD Nonferrous Price Trends

24. Rising Influence of Automated Trading
The Wall Street Journal reported that “In 2016, investors pumped $25.5 billion of new money into commodity trading advisors, or CTAs—many of which use algorithms to follow trends in the futures market—according to data provider Preqin. CTAs attracted another $7.2 billion of new investor cash in the first quarter of this year, bringing total assets to $256 billion.”

25. Positive Chinese Economic Data
According to China’s National Bureau of Statistics, Chinese real GDP grew 6.8% year-on-year in the 3rd quarter of 2017, while Chinese retail sales and industrial production rose 10.3% and 6.6%, respectively, year-on-year in September.

26. Copper Scrap Exports To China Up 9.4% YTD

27. China Restrictions on Scrap Imports
On Tuesday, July 18, 2017, China notified the World Trade Organization (WTO) of its intent to ban the import of certain scrap materials by year end. Among the items included on the list are most scrap plastics ("including polymers of ethylene, styrene, vinyl chloride and PET..."), mixed paper and slags and drosses.
More recently, the Chinese Government released its draft revised “GB 16487” Environmental Protection Control Standards for Imported Solid Wastes as Raw Materials. Of particular note is that the “carried waste” (or allowable prohibitive) thresholds have been dropped to 0.3% for all categories except appliances and vessels (0.5%).
ISRI has already notified the Office of the United States Trade Representative and the U.S. Department of Commerce on the devastating impact such import restrictions will have on the global recycling industry.
With more than $5.2 billion in scrap commodities exported from the United States to mainland China last year alone, the trade in specification-grade commodities – metals, paper and plastics – between the United States and China is of critical importance to the health and success of the U.S.-based recycling industry.

28. Policy Concerns Take Center Stage
China scrap import ban and manufacturing capacity cutbacks
U.S. trade policy (NAFTA and trade agreements, steel and aluminum 232 investigations, anti-dumping and countervailing duty cases, etc.)
U.S. economic policy: tax policy, healthcare, infrastructure spending, regulatory overhauls, etc.
U.S. and global monetary policy: Fed rate hikes, quantitative tightening, and changing Fed leadership
Every policy change creates winners and losers
Cooperation between ISRI, other trade associations, governments and other stakeholders become more critical in light of the heightened policy uncertainty

29. Outlook, Challenges, and Opportunities
The global scrap industry is cyclical in nature and continues to be driven by changes in commodity prices, manufacturing output, and global growth.
Among the challenges facing the industry today are the rising tide of protectionism, the need to distinguish scrap from waste, and the on-going restructuring of the industry.
U.S. scrap processors are increasingly focused on safety, operational efficiency, QUALITY, product diversification, and third-party certification.
Amid rapidly changing market dynamics, technologies, and regulatory requirements, consistency and transparency are crucial.
Policy changes are now a key driver for how the scrap industry evolves going forward, impacting the industry’s on-going restructuring, trade flows, and investment in technology.
Without the free and fair trade of scrap commodities, the full range of economic and environmental benefits associated with recycling will not be captured.
Cyclical industry, but with bright prospects.

30. How Does ISRI Fit In To All of This?
1,300+
Member companies
4,000+
Recycling facilities worldwide 34
Countries
Ferrous & non-
ferrous metals
Tire &
Rubber
Paper
Plastics
Textiles
Electronics

31. Institute of Scrap Recycling Industries, Inc.
Our Mission: To promote safe, economically sustainable & environmentally responsible recycling through networking, advocacy & education

32. Scrap Specifications Provide Critical Guidelines for Market Development
ISRI’s scrap specifications are internationally-recognized guidelines used by buyers and sellers of recycled materials and products including nonferrous and ferrous scrap, glass cullet, paper stock, plastic, electronics, and tire scrap.
The specifications are published in the ISRI Scrap Specifications Circular that can be found at
ISRI is continually in the process of updating our scrap specifications in order to ensure that the specifications meet the evolving needs of the industry. For more information, please contact

33. Thank you Joseph C. Pickard Chief Economist and Director of Commodities Institute of Scrap Recycling Industries Inc. Tel: (202)