Our Blog

Substitutes are putting downward price pressures on Steel | 2015


Many of the concerns discussed in last month’s market report are spilling into March as well. This includes the dollar’s strength which is causing minimal scrap exports to leave this county while cheaper iron ore and semi-finished products are rushing into the United States. These lower cost scrap substitutes are putting downward price pressures on the domestic scrap markets in this current environment of softening/flat new steel demand. Adding fuel to the fire is the ongoing overhang of excess tons available in the market. On the other hand, some better news is nearing the horizon (I hesitate to say good news at this point), we are at the bottom or nearing the bottom of the market and prices are likely to hover at these current levels for 30-60 days.  Early market speculation had scrap steel prices pegged to fall $20 ton for March but mills found increased opposition at those levels and settled with most suppliers at down $10 and sideways in other parts of the Southeast U.S. Prices will likely remain near these weakened price points until something acts as a stimulator to cause a change in the current environment.


In the past, this “stimulator” had been the Export markets and they are likely to help but the strength of the dollar has minimized their affect on the markets. In my humble opinion, it will take 3 things to happen before an environment will be ripe for scrap prices to begin increasing again. Firstly, demand for new steel products must increase signaling to mills to be more aggressive in their scrap buying program and tipping the balance of demand versus supply.   Secondly, the scrap substitutes must become more expensive widening the gap between scrap and providing a path for scrap prices to follow. Thirdly, export buyers must return to the US market providing some healthy competition and absorbing the summer months increased scrap supply thus reducing the scrap oversupply and increasing prices. We may see some small price increases in the near future but the mechanics in the market needs these above mentioned transformations to see sustained growth and price increases.



There continues to be a mixed trend among base metals over the past 30 days. In February, copper gained some positive ground while both aluminum and nickel closed out the month with losses. Copper was up and down during the first 2 weeks of the month, but eventually gained some traction and closed out the month with a gain of 8%. This rise in copper is mainly due to the close of the Chinese New Year bringing the worlds #1 consumer of copper scrap back into the market and giving it a much needed boost. Also helping strengthen copper was the agreement reached over the labor dispute at the West Coast ports which does appear to be slowly loosening up much needed equipment and vessel bookings.  Aluminum prices on the other hand saw a minor drop of 3% due to falling LME prices and rising mill inventories.  Nickel prices took the largest hit in February dropping 9.5% by month end.


There is one constant thing you can count on in a commodity trading business; it’s always changing. Have a great month.

Have a comment or prediction about the market? Share with us in the comments below.

Metro Group | Ogden is located in Ogden | Utahvisit main site>>

Tags: , , , , , , , , , , , , , , ,

This is a unique website which will require a more modern browser to work! Please upgrade today!