by MAURA KELLER
It’s been over a year since Russia invaded Ukraine and it affected a myriad of industries, including the metals recycling market.
According to Irina Tsukerman, business and geopolitical analyst, president of Scarab Rising, Inc., a media and security strategic advisory, both of the iron and steel industries in Ukraine have been disrupted by the war. Prior to the war, Ukraine was a major supplier of these metals to Turkey, China, and parts of the EU.
“Just half of the iron plant’s blast furnaces are currently operational, which has significantly affected the production,” said Tsukerman. “Other steel plants have ceased production altogether. This has affected the global steel market, especially in Central Europe, disrupting the supply chain.” Other critical metals and raw materials endangered by the war include nickel, aluminum (of which Russia is one of the leading global producers), palladium, potash, and vanadium. Many of these are important to the transition to renewables.
Greg Pendura, chief executive officer of Regenx, the first non-smelter company to extract precious metals from diesel catalytic converters, said metals and commodities that are sourced in Russia and Ukraine have additional supply pressures, especially energy.
“Global COVID-related concerns and recession fears are having a stronger impact on over all metal pricing on a global basis due to anticipated supply and demand,” Pendura said. Higher energy costs, not only in Europe but worldwide, are affecting metal pricing and will add to the problem as recessionary fears subside in the future. In addition, China beginning to ease its COVID restrictions will have a large impact on metal pricing. U.S. metal pricing will see increases as a result.
“Certain base metals, such as nickel, are currently seeing rising price pressure due mainly to batteries for EVs,” Pendura said. “But overall recessionary fears are having a negative impact on short-term pricing. Precious metals such as platinum, palladium and rhodium are currently seeing downward pricing pressure due to anticipated reduction in demand due to worldwide economic factors.”
As Tsukerman further explained, sanctions on Russian steel by EU further complicated the picture. Moreover, Ukraine, for its own part, has significant untapped deposits of lithium, which are essential for EV batteries, as well as titanium and iron ore needed for various industries.
“All of that caused market prices for metals to skyrocket, affecting, of course, the U.S. European steel producers are now looking to secure steel elsewhere and this presents an opportunity for the U.S., which has an independent steel supply,” Tsukerman said. “However, since entire industries are shifting gears as a result of war-related adjustments and disrupted supply chains, U.S. steel actually saw demand drop.” The reason for that also includes escalating energy costs, which are affecting production in various industries.
As the war has continued, Tsukerman pointed out that U.S. steel shifted production to focus on pig iron, toward electric arc furnaces. It has also shifting domestic supply and its raw materials in Europe.
“This is, in part, in response to the war and is also disrupting specifically the supply of pig iron. Companies are trying to shift to other materials to minimize dependency on pig iron,” Tsukerman said. “There are also discussions that these developments may cause the U.S. to shift to green steel production, but that is going to take time and additional resources.”
Impact on Metals Recycling
Meanwhile scrap prices in the U.S. are likewise being affected.
According to Pendura, typically a Ukrainian/Russian war would show pricing pressure on metals produced in these countries, especially with imposed sanctions on Russia. This would be positive for the recycling industry but due to economic factors, this has not been evident except for energy.
“Nonetheless, the future for the recycling industry is very robust. The cost in traditional mining for the production of all types of metals is rising and this will increase pricing pressure in the future,” Pendura said. “Add to this, increased environmental regulations, which will only increase metal pricing in the future. It is far more difficult to find large high-grade deposits today and this will further impact economic feasibility of many of the newer mines. People view mining as a non-renewable resource. Sustainability is a crucial concept. You need to have a strong relationship with mining and recycling. Non-renewable mining, along with recycling, will enhance the principle of sustainable development.”
James Hill, chief executive officer of MCF Energy and an energy industry veteran, said the Russian invasion of Ukraine triggered a global energy crisis, and the price of energy being used by smelters in particular has risen. There is speculation smelter closures will take place across Europe ahead of next winter. Due to the current economic slowdown, however, Hill said we may see a stark decline in the demand for metals, at least temporarily.
“The invasion led to immediate and direct consequences on global energy, causing prices to rise sharply and, in turn, causing harm to the U.S. metals industry. Since February of last year, everything from the production of metals to the transfer and sale of metals – in addition to metals recycling, has been impacted,” Hill said. “This quick turn of events led buyers and sellers to look for strategic avenues throughout 2022, largely to keep trade channels open, and we will see the continuation of this in 2023.
During the early half of 2022, as Hill pointed out, the industry also saw the cost of U.S. raw materials increase and, at the same time, experienced a drop in demand for raw and processed metals.
“One year later, we are now seeing signs of a rebound, which is correlated to the energy markets,” Hill said. “However, uncertainty remains for the latter half of the year.”
And according to Tsukerman, as a result of nickel shortages critical for EV production, the U.S. and other countries have launched a critical minerals energy security plan, trying to stockpile materials.
“The war has highlighted the U.S. dependency on foreign imports of the materials critical to renewable industries,” Tsukerman says. “Copper too has suffered from similar disruptions. Marketwise, energy traders who have been profiting as a result of rising energy prices, are now shifting towards metals and crops as an investment. Long term, the U.S. will have to readjust to these changes which will probably linger for some time even when the war is over. That also means a slowdown to the timeline of renewables shift.”
Pendura said the direction the Ukrainian war takes will be a determining factor in the short term. A Russian victory would lead to tension and uncertainty and would have a negative effect on growth. A Ukrainian victory would impact Putin’s position and would in all likelihood have a positive effect on growth.
“The long-term effect on the U.S. metal market will be an increase in production along with increased pricing,” Pendura said. “The metals recycling market is going to experience a positive upside for a significant period of time and will be viewed as a positive factor in future economic growth and will be viewed positively from a resource sustainability perspective.”
Published in the April 2023 Edition of American Recycler News