“Too many other buyers. I can tell other buyers were here yesterday,” Johnson Zeng told Bloomberg. “There wasn’t as much scrap as usual.” For Zeng and other Chinese scrap metal buyers who purchase millions of pounds of metal in the U.S., it’s a seller’s market; with increasing competition among buyers, scrap yards can afford to haggle over a $60,000 purchase order.1
As a result, entrepreneurs have been looking for creative ways to engage potential clients. A 2013 eHow article describing the scrap metal export industry is littered with comments such as, “Are you selling?” and “I am looking for a reliable supplier of structural steel scrap metal dealer for export to India. Please contact me.”2
But that was two years ago. Today, scrap buyers like Zeng are facing yet another challenge: a weaker Chinese marketplace. Credit constraints and economic contractions are slowing demand for copper, gold, and iron ore. In May, China will host the 6th World Aluminum Raw Materials Summit in Qingdao, to discuss slowing economic growth, oversupply, and foreign export limits.3 For many, the summit represents an opportunity to discuss consolidation among Chinese importers – mergers and acquisitions that will drive efficiency and access to technology.
Goldman Sachs predicts the market for some metals – palladium, nickel, and zinc – will improve in 2015 despite deflation, citing a stronger U.S. dollar against foreign currencies.4 If that happens, consolidated Chinese import companies will enjoy greater negotiating power with U.S. clients. Like Groundhog Day, weak economic trends are an opportunity for these companies to improve before the market rallies.
About ARS
Advanced Remarketing Services offers innovative solutions to some of the remarketing industry’s toughest questions. We navigate the confusing landscape of wholesale, salvage and consumer markets to sell the vehicles in the best venue to the most appropriate buyer base.