Over the last week I’ve noticed that Shanghai’s army of (some say) 100,000 scrap peddlers have been unusually busy. The piles of cardboard on the streets, and on the backs of bicycles are noticeably larger; the bags full of cans and bottles are stuffed noticeably tighter. Past experience has taught me that this is a seasonal phenomenon: scrap peddlers, like most Chinese, are interested in accumulating as much cash as possible before the Chinese New Year (starts Sunday). And they are aided in this effort by small businesses that have spent the last year accumulating scrap inventories (say, piles of water bottles in the proverbial “back room”) with the intention of liquidating them for additional cash on the verge of the New Year.
What makes this year different is the global collapse in scrap recyclable prices over the last three months. Margins for scrap peddlers, and major scrap recycling companies, have shrunk, and the price of many recyclables is now not far from the rock bottom price of production (ie, the cost of producing the materials). And, among the world’s recyclers, few have been hurt worse by this decline than Chinese recycling companies. So it came as no small surprise to me when – in the course of a long walk through the French Concession this afternoon – I spoke to three scrap separate scrap peddlers who told me that buying prices for plastic and paper scrap have rebounded by as much as 20% over the last week!
This bounce bears absolutely no resemblance to what’s happening in the global markets for these materials, and I’m at a loss to explain it. Shouldn’t prices be declining? Maybe there’s a premium on scrap from the French Concession?