Scrap Spot Prices – Chinese New Year, Shanghai, Edition.
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?
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Hey maybe the scrap prices have hit bottom.
Comment by Sean — January 20, 2009 @ 11:46 pm
Or just the normal ups and downs of a volatile market.
Now that it’s unprofitable to ship American recyclables to China, the market is now more local than international. A smaller, less liquid market would imply greater volatility in pricing.
Comment by Tom — January 21, 2009 @ 1:47 am
Interesting. I noticed a similar bounce-back in Dalian a couple of months for plastic bottles. A large 2 litre bottle would go for 2 mao pre-crash (doorstep price), falling to 3 fen post-crash, back to 1 mao two months ago and as of last week around 7 fen. The old man which holds the monopoly of the housing development I’m in is dictated to by a larger buyer, whom he says also has a price dictated. The re-bound has at least allowed him some assurance of income, though he does dislike New Year period as many ??? (a curious distinction as he’s clearly from Shandong province) try to get a cut on his business to scrape together train ticket money.
What are doorstep prices in Shanghai? Or anywhere else in China?
Comment by Alex — January 21, 2009 @ 7:44 pm
Doorstep price for 500/600ml soda bottles in Hangzhou is now 2 to 3 fen, down from one mao at the beginning of the year (I remember it being 2 mao about 7 years ago). Newspaper is 2.5 mao per jin, down from 5 mao per jin, and cardboard + glossy paper is 2 mao, down from 2.5. I did see a report from a major local processing company that they were lucky had the cash flow and storage area that has enabled them to stockpile now while prices are cheap, but also desperately hoping that prices will be back to normal within the next few months.
Comment by dace — January 21, 2009 @ 11:28 pm
Alex – By comparison, I found 2 litre bottles going for 1 mao, cardboard as much as 2.5 mao/jin. That’s a big jump.
Comment by Adam — January 22, 2009 @ 12:16 pm