Scrap Metal Markets have a Lackluster February

The one word to describe scrap metal markets is:

lack·lus·ter: ˈlakˌləstər/ adjective lacking in vitality, force, or conviction; uninspired or uninspiring.

Markets moved sideways for February with little excitement moving into March. Scrap yards throughout the country are anxious to find a home for their scrap at any price. Steel mills severely reduced their volume buys due to lack of demand. A mill in the Midwest purchased 30K tons vs. 130K normally; another mill bought 50K – which is half the typical buy.

Exports… Utilization rates in Turkey are less than 50%. The real drag is our friends in Asia – they’re celebrating the Lunar New Year of the Monkey, and expect the festivity to last up to 15 days! Nuts – can you imagine, a fifteen day holiday? No wonder they’re in a recession.

Future forecast – Did you read Crain’s Cleveland Business, they quote Andrew Lane with the investment research firm Morningstar Inc. “Expect steel prices to remain low, which he defines as below $500/ton, through the end of the decade.” Gee Whiz – 4 more years?

Our national trade group, ISRI (Institute of Scrap Recycling Industries) recently held a webinar to discuss falling prices. A panelist, Lisa Gordon, from AMM anticipates more downward pressure. Historically, scrap follows lockstep with both Oil and Iron Ore; and inversely correlated with the strength of the dollar (robust greenback = lower commodities). Both have more room to fall with the supply glut.

Take a look at this chart, the economic indicators are signaling a recession but the rest of the world doesn’t know it yet?!

 

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Ferrous Prices Increase this January

Plunging oil prices below $30/barrel to 12 year lows. A tanking Chinese economy is bringing down the demand for our commodities. The strong dollar is making our finished steel more costly and unattractive.

All doom and gloom? No! Surprisingly, ferrous prices for January took a slight upward bump. Most mills brought down inventory for the year-end bean counters; then began the year with a deficit and had to pay to replenish their stockpiles. As you know – what goes up probably comes down (stay tuned for February’s update).

The cold temperatures could impede our inflow, freezing scrap to the ground. Frigid weather could use some of the excess oil reserves that the Iranians will be flooding the market place with. It’s funny to believe that Jack Frost is our friend.

On the Non-ferrous side, what alloy lost the most value?? In December 2014, LME Nickel was listed at $15,025/ton. At the end of 2015, it published at $8,700 – a loss of 42%. Clearly, this was the worst performers of the major metals. Hope you’re buying new stainless steel and other Ni alloys!

Check out this aerial view of our main yard. All concrete and asphalt with retention ponds on both sides; the office/non-ferrous warehouse in the background:

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