We here at B.L. Duke are pleased to announce that we have been named a finalist for the 2018 American Metal Market’s Steel Excellence Awards in the Scrap Metal Company of the Year category. Winners will be announced on June 26, 2018 at The Edison Ballroom in New York City, New York.

“We’ve worked hard over the years to deliver outstanding customer service and revolutionize the scrap metal recycling business,” said our President & CEO, Lou Plucinski. “It’s an honor to be named a finalist among so many great companies in the industry.”

Every year, American Metal Market recognizes the highest achieving companies in the steel industry for innovation and initiative across multiple categories. This year’s finalists total 53 companies across 15 categories. Finalists were selected by senior American Metal Market editors, and those entries will be scored by steel industry veterans who serve as judges to select the winners. B.L. Duke is the only finalist from the Chicago-land area. Other finalists in the Scrap Metal Company of the Year category include Ferrous Processing & Trading Company, Liberty Iron & Metal Inc, PSC Metals, Schnitzer Steel Industries Inc, Sims Brothers Recycling, Triple M Metal LP, and W Silver Recycling Inc.

“We have big plans in store for 2018,” states Marissa Plucinski, VP of Sales. “They include innovative technology and additional scrap processing capabilities that deliver excellent customer service and unbeatable pricing.”

This recognition comes after a year of continued innovation and growth for us. In 2017, we increased sales revenue by 65% and added 32 employees to our workforce. In addition, we recently completed plans to double our footprint with the acquisition of the Gerdau Rolling Mill next to our Joliet campus, which will allow us to plan for additional products and services that will pass on even more cost-savings and conveniences to our customers.

For more information or a list of services you can check out our website at www.BLDUKE.com or call 773-778-3000 and ask to speak to a sales team member.

2018 Economic Outlook

I attended the Precision Metalforming Association’s(PMA) 2018 Economic Outlook presentation by William A. Strauss on February 23, 2018. William is a Senior Economist and Economic Advisor at the Federal Reserve Bank of Chicago.

It is worth it to note that this presentation was delivered before the Section 232 announcement of tariffs on steel and aluminum imports to the United States on March 1st, 2018 by President Donald Trump. These tariffs between 10% and 25% could have a significant impact on the forecasted projections.

In 2017, the United States Real Gross Domestic Product(GDP) expanded by 2.5%. The Midwest economy is growing above trend in-line with the national economy. The Federal Open Market Committee (FOMC) is predicting the GDP to grow just above trend in 2018 and then with trend in 2019 & 2020. With the GDP expanding we saw the real value of the stock market reaching new highs.

While we are seeing the expanding GDP and stock market highs, we are also seeing a restrained recovery path of the Business Cycle compared to previous deep recessions. Recovery from both the 1974-75 and 1982-82 recessions saw an average annualized growth of 4.3%, while we are currently seeing an average annualized growth of 2.2%. Even with a lower average of annualized growth compared to previous deep recessions we are still seeing a low probability of a recession within the next two quarters. A growing GDP is an important indicator for the steel makers. An expanding GDP is illustrating a positive demand for the automotive industry, energy sectors and construction industry.

Source: William Strauss – Federal Reserve Bank of Chicago

The Composite Index of the 10 Leading Economic Indicators continue to rise. The leading economic indicators usually change before the economy as a whole changes. They are therefore used as a short-term predictor of the economy. For example, S&P 500 Stock Index returns are a leading indicator. We will see the stock market rise before we see the economy recover from a slump and vice versa. Another leading indicator is Manufacturing and Trade Inventories and Sales which is a primary source of information on the state of business inventories & sales.

The United States employment increased by over 2.1 million jobs over the past year while the nation’s unemployment rate has fallen to 4.1%. With the increase of employment and the falling unemployment rate we are still seeing a significant number of unemployed Americans for more than 27 weeks. Illinois ranked below the United States as whole? Or compared to other states? as well as Iowa, Michigan, Wisconsin and Indiana in regards total employment change from the year prior. Illinois’ unemployment rate is .7% above the national rate. Wages and benefit costs continue to increase at a very slow rate. Slow productivity growth helps explain why even though we have seen a relatively strong employment increase we are not seeing that translate to higher wages.

When analyzing the inflation rate, the FOMC finds that the core personal consumption expenditures(PCE) inflation rate remains low. Core PCE inflation is when volatile components such as food and energy are removed. The FOMC predicts that the core personal consumption expenditure inflation rate will be around it’s target of 2%.

Housing Market Outlook

As for housing, the Blue Chip Housing Starts forecast calls for a continuation of the gradual recovery in housing. The 2017 actual figure was 1,207,000 housing starts in 2017. They are forecasting 2018 to have 1,279,000 housing starts and 2019 to see 1,328,000 housing starts. Housing starts are the beginning of construction on a new house and is used as an economic indicator. Structural steel will see a rise when we see a rise in housing starts.

We are seeing manufacturing output increase after being stagnant the past couple years. As manufacturing output is increasing we are still seeing capacity utilization (manufacturing) stay below full capacity, though moving higher the past year. These trends have led manufacturing employment to increase by 186,000 workers over the past 12 months. The Midwest Economy Index’s manufacturing component is above trend and performing well above that of the nation. This is leading to manufacturing job growth in the Midwest performing above the US.

Vehicle Sales on the Economic Outlook

Light vehicle sales saw record numbers in 2016 but in 2017 we saw a slight dip of 1.4%. Continuing with the trend we saw light truck sales increase by 5% and passenger car sales were 11.4% lower. Alternative power vehicles, including hybrids, hold a very low market share of total sales. Blue Chip Light-Vehicle Sales are forecasting lower. 2017 saw 17,100,000 sales and 2018 is forecasting 17,000,000 with 2019 projecting 16,700,000 sales. US Aluminum foundry alloy premiums rely heavily on demand of the US automotive industry. The premiums started to slow at the beginning of 2018 but demand from large automakers is said to be sustaining the market. Aluminum sheet capacity is poised to grow in 2018.

The industrial sector saw strong output growth over the past several months. We are seeing supply managers’ composite index grow vastly over the past year. Chicago saw a significant reporting increase over the national average. While industrial production is forecast to improve it is likely to improve below it’s historical rate this year.

The Federal Reserve has raised the Federal Funds rate by 1.25% since December 2015. The Federal Reserve’s balance sheet has been flat for the past several years but the Fed began to reduce it in October of 2017. Reducing the balance sheet is considered, “Policy Normalization”. We can expect to see the Fed rate rise to ‘normal levels’ while security holdings are sold off the balance sheet. This is a sign of the Federal Reserve believing in the strength of the US economy since it slashed interest rates to almost 0% in 2008-2009.

Head to www.BLDUKE.com for a list of services, a quote or to schedule a pick up. Follow B.L. Duke on Twitter, Facebook and Instagram for news and market updates in the steel and scrap metals industry.

At this time last year, we had a lot to be optimistic about. In 2017, the market rebounded moderately with continued growth after a tough 2016 market.  Now, we are a couple months into the new year  and are predicting a bright 2018 outlook for the scrap metal industry.  Markets kicked off with a generous increase of $30/gt for cuts and $20/gt for primes.  We saw a little sneak preview of a similar boost back in December.  As history shows, January typically tends to be a strong month, while February falls flat.  However, buyers, sellers, and brokers are particularly bullish.

Towards the end of 2017,  Nucor’s DRI (direct-reduced iron) plant in St. James, Louisiana was forced to halt production due to an unforeseen outage.  This forced Nucor to consume more scrap than expected, driving ferrous scrap prices upward.  Recent inclement weather is another reason to give confidence in a forecasted increase.  The Midwest and East Coast were stricken with tough winter conditions within the last month.  Considerable amounts of snow and frigid temperatures made for logistical disasters and a slowdown of operations.  Supplies are low, driving for high demand. According to ISRI (Institute of Scrap Recycling), other factors adding to  an uplifting market are potential trade remedies from Section 232 steel investigation and other trade cases, steel production cutbacks in China, recovering iron ore prices, healthy domestic order books, and the new corporate tax cuts.

2018 scrap metal outlook

Heading into the new year, the biggest concern in the scrap industry seems to be China’s ban on scrap imports.  Mid 2017, China caused an uproar by announcing their plans to the World Trade Organization (WTO) to tighten their threshold of impurities on scrap imports, unlike the rest of the world that follows the global standard.  “ISRI is very disappointed to see the Chinese government finalizing its Environmental Protection Control Standards and failing to take the opportunity to bring them in line with global standards that reflect manufacturing requirements and are utilized by environmentally responsible recycling operations in the US and around the world,” ISRI president Robin Wiener said in a statement.  There are still many questions and doubt heading into the new year regarding the ban.  Learn more about China’s ban on our last blog post.

The Midwest Chicago market saw another change recently when the January AMM was released with “Historical” and “Expanded” pricing.  The change was put in place to start including 3 Indiana mills and an Iowa mill to justify logistical differences.  Both numbers will be released for the next 6 months, then will be down to one “expanded” category come June 30, 2018.  The new category will be listed the way it always has been, as “Chicago“.  Though expanded prices are showing higher right now, we believe sooner rather than later the prices will end up aligning, before the 6 month period is over.

 

“All of the fundamentals are in place to ensure a strong half of 2018!  Additionally, with hot band futures pushing north of $740,  it will be difficult for mills to justify pushing the scrap market down.”

What are your thoughts on the 2018 steel market? Comment below!

China bans scrap metal

What Now, China?

Recently there has been uproar in the recycling industry and to be candid, we didn’t think this news would have such an effect on the Scrap Metal Industry.  In July, China proposed a new ban at the World Trade Organization (WTO).  Although the ban hasn’t gone into affect, the world is experiencing some significant disruptions. How will this impact the global economy and most importantly, what will it do to the Metals Industry?

What is the “Big Ban”?

According to The Institute of Scrap Metal Recycling Industries (ISRI), there are two important parts to this ban. First and foremost, the proposed ban limits or prohibits 24 different imported materials into China. Most are solid waste, such as paper, plastics, slag, waste wool, ash, cotton, and yarn. The second part of the ban includes a “carried waste” threshold, and this is the part the Metals Industry needs to pay close attention to. China’s proposed draft of the ban includes a 0.03% “carried waste” threshold on all imports into the country. Carried threshold meaning the contaminants and prohibitive materials that are commonly mixed in with recyclables, including scrap metal. Currently, the global standard is 0.05-5.0%.  The ban also mentions a proposed 80% weight requirement on all metal and electrical appliance scrap and the current global standard is a 50% threshold.

scrap metal recycling ban

Why The Ban?

According to China, the ban and the proposed carried waste threshold are in efforts to replace foreign materials with domestically generated material. China claims they want to reform their import system to protect the health of their citizens and environmental interests. To date, Chinese authorities have yet to divulge any specific details.  Many exporters are uncertain whether the ban includes their materials, such as certain plastics, slag, mixed paper.

After the announcement, the WTO requested China release more specific details. In response, China’s Ministry of Environmental Protection has released a draft of changes of some technical specifications. For imported scrap, stricter regulations on impurities, weight requirements for metal and electrical appliance scraps. However, many unanswered questions remain.

metal recycling industry

Recycling Industry – USA

For non-metallics, China’s ban on paper and plastic would affect 18% or $532 million of USA scrap. The scrap trade to China is worth $6.5 billion annually and impacts 150,000 US jobs. Currently, 40% of the USA’s total exported scrap goes to China. The plan would essentially affect all mixed metals, especially scrap products that must be dismantled, such as cable, scrap wires and scrap motors. With that said, the paper, plastics and copper industries have already been experiencing disruptions in their day to day operations for some time now. Although the ban hasn’t gone into effect, Chinese importers report having trouble securing permits.

According to one of B.L. Duke’s copper consumers, “The Chinese’s recycling restrictions have created complete chaos!  We currently have 500 containers stuck in a port held up by Chinese Customs.”  

China accounts for more than half of the world’s total scrap imports and this ban won’t only affect the United States economy but the world economy.

ISRI

ISRI to the Rescue?

After China’s vague announcement at the WTO, ISRI immediately spoke up and voiced their concerns. ISRI has urged China to specify the difference between the term “waste” and “scrap”.

“ISRI is extremely concerned with the reduction of the control requirement for ‘carried waste’ to 0.3% for all commodities,” wrote ISRI President Robin Wiener in the letter. “The application of this standard will effectively result in a ban on the importation of all these commodities. It is simply not possible to achieve such a control level, nor is it possible to even measure it with such accuracy.”

“In the United States, a 50% threshold is used when defining what is considered legitimate scrap metal for recycling. For consistency in the global trade, we would respectfully request that a uniform standard of 50% be used within China as well,” Wiener wrote.

Final Thoughts

Many recycling experts, including ISRI, are very concerned how China can possibly measure 0.03% and place such tight controls on imports. According to the Bureau of International Recycling, restrictions on scrap imports into China will become more and more aggressive as time goes on. Many leaders understand what China is trying to do environmentally, but there needs to be consistent threshold for fair global trade and ISRI plans to fight the ban.

The biggest take away is China’s need to have clearer details and specifications of the ban. In the immediate future, the Metals Industry needs to be alert and keep a close watch on the proposed “quality threshold” specifications.