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The market is overrun with surplus scrap metal | 2014

Ferrous:

Another colossal drop in steel pricing for November as mills announced Friday that prices would be down $ 30-40 Ton across the country. This comes as a surprise for most suppliers as we were expecting a $15-20 drop due to the steep $25 Ton drop already experienced in October. Why is the market so weak? Good question, it has to do with too much available scrap in the markets. Here are several reasons the market is overrun with surplus scrap.

  1. The absence of export buyers. There is very little steel scrap leaving this country right now, especially off the West Coast, leaving a ample supply of scrap stock and giving the Domestic mills the leverage to pay what they want for their raw materials.
  2. The dollar has strengthened compared to foreign currencies over the past 60 days making the “investment” of buying US scrap more expensive than the alternative scrap tonnage in other counties with weaker currencies thus keeping exporters at bay. Most commodities prices, including oil, have softened recently due to this monetary strength.
  3. Mill orders for new steel are getting stagnant resulting in less scrap being melted and further exacerbating the scrap supply problem. November and December are holiday months and mills lose production time and potential orders around these days. Steel mills are historically timid to buy scrap at the end of the year in efforts to reduce their inventories on the ground thus leaving surplus scrap in the suppliers yards.

If you’re a steel buyer, you can hope this recent $55/ton swing in scrap prices will open the door for softening new steel prices, however, it looks as though the mills are putting this price gap into their 4th quarter bottom lines instead of easing your prices. As we all know, with commodities there is no such thing as a sure thing and the only thing we can predict is more change is coming.

 

Non-Ferrous:

Base metals continued their volatile path in October. Aluminum shrugged of its previous stagnant price trend and made a steady gain of 8% through the month of October while copper bounced up and down throughout the month and finished up 3 cents a pound, just under a 1% gain. Nickel continued its weak trend falling a dismal 12.5% before making a small rebound late in the month to end October with a total loss of 6.5%. Stainless prices seem to have hit the bottom (at least we hope) and look to hover at their current price levels until nickel prices strengthen and demand for stainless products increase globally.


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

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