Economists and recyclers alike are trying to figure out whether a new calendar on the wall will bring with it changes to the global and national economies. Declines in January scrap prices sent a negative initial signal, but recyclers are not convinced it is a harbinger of things to come.

Although surveyed ferrous scrap pricing for the January buying period conducted by Fastmarkets AMM fell by $29 to $40 per ton (depending on the grade and region), scrap recyclers contacted in early January point to unseasonable weather as a noneconomic factor in the decrease.

“We kind of count on snow as a factor to keep supply short and prices higher in months like January and February,” says a Great Lakes region recycler. As of early January, he says many metro regions had not yet experienced their first major snowfall.

The same recycler, whose company does considerable business with the automotive sector, also says that industry’s notorious seasonal cycles are less of a factor than they used to be.

“We might see busheling drop by 20 percent in volume in December rather than, say, 50 percent or 70 percent in some of the former business models.” – a Great Lakes region recycler

Auto assembly and engine plants increasingly avoid complete December shutdowns, shifting instead to a “rolling” schedule that may shut down one line within a facility but not an entire plant.

With this new technique adopted by auto companies and their first- and second-tier suppliers, “We might see busheling drop by 20 percent in volume in December rather than, say, 50 percent or 70 percent in some of the former business models,” he says.

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While the American financial press seems to be on alert for a recession, the Great Lakes recycler and another recycler in the Great Plains region say they and their customers do not see blatant warning signs.

“Even during the Christmas season, there were no big slowdowns,” says the Great Lakes recycler. He says a regional customer running a stamping plant has engaged in a recent building expansion but still runs the risk of having to turn away work because of an overflowing order book.

The Great Plains recycler says mid-to-late December did produce a lull—“the phone just stopped ringing,” he remarks—but business resumed in January, and both his suppliers and his consuming customers foresee an active first quarter of 2019.

The same recycler does express concern, however, about a “self-fulfilling” prophecy if the financial media continues to anticipate a recession. He says some smaller scrap dealers are already holding onto material and seem “afraid of market changes.”

The Great Plains recycler adds, “The good news is our larger suppliers and buyers have ramped back up in January, and small businesses overall in the United States continue to be doing pretty well.”

The same recycler also notes that vehicle sales and home sales are stalling nationally, which likely fuels some of the recession concern. A scrap buyer in the Southeast says the construction sector in his region remains strong, but the demolition sector there (a leading indicator for construction) has grown quieter. “It’s cyclical,” he says.

A survey of U.S. and global economic forecasts conducted by Milan-based Gianclaudio Torlizzi of T-Commodity points to some of the factors that have economists wondering if a slowdown is in the near future.

Torlizzi cites London-based Barclays as saying concerns over 2019’s economic outlook helped cause a sell-off of metals and other asset classes. From early December 2018 to early January, copper prices slid 8 percent, and the Jan. 4 London Metal Exchange (LME) close of $5,775 per metric ton was down 21 percent from a 2018 high of $7,333 reached in June, he writes.

“Meanwhile, the Dow Jones Industrial index lost 12 percent between Dec. 3, 2018, and Thursday, Jan. 3, though Dow stocks rose more than 625 points in trading Friday, Jan. 4, 2019,” according to Torlizzi’s analysis.

He writes, “Equities and industrial commodities will stage a nice move higher if and once investors will believe recession in the United States is not in the cards. Currently, equity markets appear to be pricing in around a 60 percent chance of a typical U.S. recession.”

Torlizzi continues, “The performance of industrial metals over the previous months suggests that commodity markets have priced in around a 56 percent chance of a typical U.S. recession, in line with U.S. equity markets.”

The analyst says that during the previous five recessions, “The excess return of the industrial metals Goldman Sachs Commodity Index (GSCI) from peak to trough was an average of negative 43 percent.”

So far, he adds, “Industrial metals have fallen 24 percent since the recent peak on April 18, 2018, so based on the average 43 percent fall during past U.S. recessions, we can interpret recent performance in base metals as pricing in a 56 percent chance of a typical U.S. recession.”