The quarterly update for RecycleNet Corporation (OTCBB: GARM)
By Paul Roszel
During 2004 there was an unprecedented increase in demand as well as prices
across the board for recyclable commodities. Never before in the 30 years we
have been tracking this industry have all the factors aligned so that different
commodities have peeked at the same time.
New offshore mill capacity, which dwarfs domestic North American
consumption, has state of the art, efficient technology, lower cost labor rates,
and less stringent environmental compliance costs, which results in huge leaps
in demand for recyclable commodities.
Scrap exports to China, specifically steel, have dominated the financial news in
the past few quarters, but little publicity has been focused on sleeping giant
economies like India or other Asian countries and little or no popular attention is
being paid to the developing eastern block European economies particularly in
regard to scrap metals, waste paper & plastic recycling.
In the past few months several factors have adversely affected exports. Limited
availability of rail freight and an intermodal container shortage is one key factor.
A change in policy in China called AQSIQ [Administration of Quality
Supervision, Inspection and Quarantine] now requires certification for
businesses to import scrap materials. Businesses must also secure private
financing guarantees as opposed to state backed guarantees to open
operations in China. But as long as the Chinese currency remains hard pegged
against the US dollar there will be continued economic stimuli for export to
China. This will remain in effect until the Chinese currency becomes free
floating in world monetary markets.
Not all increases in the price on commodities have filtered down to the
generator level, but even as export prices for recyclable commodities have
peaked or temporarily receded, the prices at the generator level are stable or
on the increase. As the infrastructure catches