scrap heap

To anyone who works in our field, the evidence of economic recession is everywhere: declining orders, growing inventories, empty trucks and containers, and slumping demand for capital equipment, to name just a few examples. It's not just happening in the United States, either: China, the world's manufacturing powerhouse, is suffering, too.

Reports out of China mention thousands of small and mid-sized factories shutting down because orders from North America and Europe have plummeted. And if factories aren't manufacturing, it stands to reason that they no longer need the raw materials like scrap metal they ordered from overseas suppliers.

So what's happening to all of those scrap metal orders? According to a Dec. 3, 2008, article by Shanghai-based reporter Adam Minter posted on The Atlantic Monthly's Web site ("Scrapped," www.theatlantic.com/doc/200811u/china-scrapmetal), ocean containers filled with metal scrap are piling up on the docks in China. Chinese importers are balking at taking delivery of metals, whose prices have plunged by as much as 80 percent in the last few months. In some cases, they are reneging on contracts, writes Minter, who sat in on a meeting of scrap dealers and their Chinese customers.

The economic crisis could break a longstanding and lucrative trade loop: Containers filled with Chinese exports return laden with America's scrap, which Chinese recyclers sell as raw material to manufacturers, who then export the finished products to the United States, ad infinitum …at least until now. With unclaimed containers accumulating in China and scrap shipments rapidly declining, the ocean carriers that have depended for decades on waste shipments to partially defray the cost of their westbound voyages have to be just as worried as the scrap dealers are.