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In the 'Star Wars' Economy, One Thing Doesn't Pay – Financial Post

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By Adam Minter

(Bloomberg Opinion) — Junk is surprisingly pervasive in “Star Wars,” playing an understated role in nearly every film in the series. In “The Phantom Menace,” we meet young Anakin Skywalker, the future Darth Vader, working at a small electronics scrap yard and repair shop. In “A New Hope,” Luke Skywalker’s uncle buys R2-D2 and C-3PO from a group of Jawas, a species that drive massive, sand-crawling junk trucks. The recently released “Rise of Skywalker” is largely a coming-of-age story for Rey, the last of the Jedi, who spent her youth scavenging electronic scrap on Jakku, a remote outer planet.As a third-generation descendent of earthbound scrap-metal recyclers, I’ve subjected myself to repeated “Star Wars” viewings (even of the bad films), partly just to spot all the junkyard tidbits. Over the years, I’ve developed a theory or two about the waste and recycling economy in the series, and enjoyed sharing it with (primarily) other junkyard descendants. But in 2018, I realized there might be a larger audience for these insights.That year, China — for decades the world’s biggest importer of recyclables — started imposing stringent restrictions on what recycled stuff it would still accept from overseas. In the aftermath, prices for recyclables dropped steeply, raising costs and reducing profits for businesses around the world.Alas, “Star Wars” doesn’t offer any advice on how to find new markets for used plastic detergent jugs. And no, Rey can’t conjure the Force to boost the price of used cardboard boxes. But if you watch the films carefully, they have a good story to tell about turning waste into something that people might want — and, even better, buy.The “Star Wars” universe generates tons of trash, much of it recyclable. Yet for all the scrap yards and scavengers, you see very little actual recycling. Mostly, the metal, plastic and paper seems to get tossed out with the trash. My favorite example occurs in “The Empire Strikes Back.” At a crucial moment, an Imperial star destroyer dumps stadium-sized chunks of metallic garbage into space before jumping to hyperspace (this, according to Han Solo, is Imperial protocol). From an earthbound perspective, this is commercial suicide: Metals are the world’s most recyclable materials, and even villains know there’s money to be made in selling them.But a similar pattern repeats throughout the series. In “The Force Awakens,” early scenes on Jakku are dominated by the wreckage of an immense star destroyer. It’s reminiscent of the huge seagoing vessels that are run onto the beaches of India, Bangladesh, and Pakistan, then disassembled by hand and recycled in a matter of months — down to the individual screws. Crash a star destroyer in Alang, India, one of the world’s hubs for beaching and recycling ships, and pieces of it will be on sale in local markets by lunchtime.The reason for this seemingly irrational behavior is that the “Star Wars” universe doesn’t suffer from a scarcity of resources. There are dozens of mining outposts mentioned in the series, and there always seems to be another planet waiting to be exploited. In a galaxy that enjoys such surpluses, recycling won’t save much money. And the Empire, with its massive spending on planet-destroying weapons like the Death Star, doesn’t seem overly concerned about the environment.So what, then, is the business model that supports so many junkyards and scavengers? Rey, the Jawas, and everyone else who scavenges in the series recognize that there’s more value in a working gadget or spare part than in the raw materials that constitute them. The value is in the energy, engineering and manufacturing required to make the stuff. So, for example, that crashed star destroyer on Jakku isn’t stripped for metal; instead, we see Rey risk her life to scavenge it for reusable components that she can sell. Characters from Chewbacca to Luke Skywalker later demand her recovered parts for the devices and ships that they’ve learned to repair on their own.That business model wouldn’t work for plastic recyclers here on Earth. But the so-called e-waste industry — a category that includes everything from used smartphones to server racks — is rapidly diversifying into business models that look very similar to those practiced by Rey and the Jawas. At a time when recycling markets are depressed, these businesses need a new revenue stream. So rather than trying to recover raw materials that aren’t financially attractive at the moment, they’re seeking out whole gadgets and the parts within them.Robin Ingenthron, the head of Good Point Recycling, tells me that his company was making about $60 a week selling gadgets for reuse out of its scrap pile in 2015. As commodity prices fell, he reoriented the business to extract parts from old televisions and better identify the reusable gadgets already on offer. Today, sales of reusable stuff account for more than $50,000 a month, and around a third of the company’s revenue. Sims Recycling Solutions Inc., one of the world’s biggest electronics recyclers, has steadily shifted away from its traditional shred-and-recycle model to incorporate more reuse and refurbishment in recent years. Others are going even deeper, recovering specific chips from motherboards for reuse.This might come as a surprise to earthly environmentalists. But in the “Star Wars” universe, it’s the way business has always been done. In this respect, at least, the series may offer a model that works just as well here as it does in a galaxy far, far away.

To contact the author of this story: Adam Minter at aminter@bloomberg.net

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Canadian first quarter industry capacity use rises to 81.7%

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Canadian industries ran at 81.7% of capacity in the first quarter of 2021, up from a upwardly revised 79.7% in the fourth quarter of 2020, Statistic Canada said on Friday.

The increase in the first quarter was driven by gains in construction and in mining, quarrying, and oil and gas extraction.

Following are the rates in percent:

Q1 2021 Q4 2020 (rev) Q4 2020 (prev)

Cap. utilization 81.7 79.7 79.2

Manufacturing 76.5 76.7 76.2

NOTE: Economists surveyed by Reuters had forecast a first quarter rate of 80.6% capacity utilization.

(Reporting by Steve Scherer, editing by Dale Smith (steve.scherer@tr.com))

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UK, Canada agreed to redouble efforts for trade deal

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British Prime Minister Boris Johnson and Canadian Prime Minister Justin Trudeau agreed on Friday to redouble their efforts to secure a trade agreement as soon as possible to unlock such a deal’s “huge opportunities”.

“The leaders agreed a comprehensive Free Trade Agreement between the UK and Canada would unlock huge opportunities for both of our countries. They agreed to redouble their efforts to secure an FTA (free trade agreement) as soon as possible,” Downing Street spokesperson said in a statement.

“They discussed a number of foreign policy issues including China and Iran.”

 

(Reporting by Guy Faulconbridge, writing by Elizabeth Piper)

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Greater pricing power to help Canadian exporters withstand loonie surge

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A stronger Canadian dollar is usually seen hurting exporters, but the nature of the global economic recovery could help firms pass on their higher costs from the currency to customers, leaving exporters in less pain than in previous cycles.

Exports account for nearly one-third of Canada‘s gross domestic product, compared with about 12% for the United States, making Canada‘s economy more sensitive to a stronger currency, with the loonie trading near a six-year high versus the U.S. dollar.

But exporters could remain more competitive than usual after the COVID-19 pandemic led to a surge in the amount of money available for consumer spending, bolstered by government support measures. A global shortage of goods, due to supply chain disruptions, could also help.

“The appreciation that we are seeing in the currency now is less of an issue than in most other appreciations that we have seen,” said Peter Hall, chief economist at Export Development Canada.

“There are not enough goods and services available to satisfy the demands of the marketplace at the moment. And in that case there is probably pricing power,” Hall added.

The prices that Canadian manufacturers charge for their products increased at a record pace in May, while activity climbed for the 11th straight month, data from IHS Markit Canada showed last week.

Canada‘s major exports include autos, oil and other commodities. With commodity prices soaring, the Canadian dollar has been the top performing Group of 10 currency this year, advancing 5% against the U.S. dollar.

It hit a six-year high near 1.20 per greenback, or 83.33 cents U.S., last week. The Bank of Canada has said that further appreciation could weigh on the economy.

The loonie traded close to parity for much of the 2007 to 2013 period, contributing to a slow recovery for Canada‘s exports from the global financial crisis.

“What (business) was left behind after that period of an overvalued currency was relatively strong,” said Doug Porter, chief economist at BMO Capital Markets.

That reduces the risk of a “hollowing out” of the sector during the current episode of currency strength, Porter said.

At Magna International Inc, a major Canadian producer of auto parts, global diversification of its operations helps protect against currency strength.

“Movements in the Canadian dollar have become relatively less impactful to our overall business,” a company spokesperson said in an email to Reuters. “Increased global economic activity, and in particular global light vehicle production is a more important factor to our outlook.”

For now, the greater concern for manufacturers could be the reduced and more costly supply of inputs, such as semiconductor microchips, as well as the lengthy closure of the U.S. border.

“The challenge we have faced as an industry is the movement of personnel,” said Brian Kingston, chief executive of the Canadian Vehicle Manufacturers’ Association (CVMA). “If a piece of equipment on the line goes down, you may need to bring in someone from Michigan.”

For some industries, those logistical issues and the stronger Canadian dollar could be trivial compared to the jump in commodity prices.

“Under normal circumstances, a rising Canadian dollar would hinder the competitiveness of Canadian exports, but the way ag (agriculture) markets have risen overall, it’s a moot point,” said Lorne Boundy, merchandiser for Winnipeg-based crop handler Paterson Grain.

 

(Reporting by Fergal Smith; additional reporting by Allison Lampert in Montreal, Rod Nickel in Winnipeg and Shreyasee Raj in Bengaluru; Editing by Denny Thomas and Jonathan Oatis and Kirsten Donovan)

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