periscopeWhile the demand for non-ferrous metals has been better as of late, ferrous scrap metal’s demand has been underwhelming to say the least.  The wild volatility that plagued the market in 2012 seems like a distant memory.  From May of 2012 – November 2012, Chicago’s #1 Heavy Melt (American Metal Market) realized a minimum of $25 per gross ton increase or decrease from month to month.  Since November 2012 prices have been steady, only declining $10 per gross ton over a four month period.  This brings up two major questions:  Can we make sense of what has been happening in the market this last year? If so, what can we expect in March and beyond?

The answers to these questions may be simpler than you think.  Last month I attended The Precision Metalforming Association – Chicago District’s economic outlook meeting featuring William A. Strauss, the Senior Economist and Economic Advisor at the Federal Reserve Bank of Chicago.  He started his lecture by stating, “I have good news and bad news.  The good news is that the United States is the strongest economy in the world.  The bad news is that the United States is the strongest economy in the world.”  After contemplating Mr. Strauss’ lecture I decided to take a look at the US economy, specifically the GDP growth rate, to see if there has been any correlation to Chicago’s scrap metal market.  What I found should not be shocking, both the GDP growth rate and Chicago scrap prices have been trending downward slightly since 2011.  This is inline with opinions that manufacturing has lead the economic recovery.  With the manufacturing sector cooling off over the last year, so has the overall economy.

Although manufacturing and the economy have slowed, by no means should we worry about the economy contracting and scrap prices returning to 2008 – 2009 levels.  However, without an increase in demand for steel there is no reason to believe that scrap prices will rise with any significance.  Regional supply and demand forces will play a factor in pricing from month to month for the foreseeable future.  This brings us to March 2013.  Though steel demand remains weak, weather conditions and less than desirable prices have put a squeeze on the scrap supply in the Midwest.  “I think some mills came up short on their buy,” said a Midwest broker in the American Metal Market’s article Tight Supply Expected To Drive Up Scrap Prices,  “with February being a short month and inventory reductions at mills and dealer yards, the March market is poised for an increase.”  March prices may not skyrocket but I do believe they will rise.  I will be looking for increases of $10 per gross ton, recovering the price decrease experienced in February.  For additional market information please contact B.L. Duke.

crainThe 5th effective issue of the American Metal Market was released yesterday, February 7th, showing a small decrease in Chicago’s scrap market. Despite earlier speculation, there was only a slight drop of an average of $9 per gross ton across the board. According to the American Metal Market’s article published February 4th, 2013, February Scrap Prices Appear Poised for Fall” by Lisa Gordon, there was speculation of a drop in the market of $15-$20 per gross ton. According to Gordon, “An ample supply of raw material, mediocre mill demand and bearish mill buyers” were some reasons for the expected drop in the scrap market in February. Another reason some were speculating a drop in Chicago’s scrap market in February was due to the fact that many mills were canceling orders in January. On the other hand, a Chicago scrap processor believed there would be as much as a $20 drop in the market if there wasn’t enough resistance from sellers.

As of yesterday, No. 1 Heavy Melt settled at $349 per gross ton in Chicago, down $9 per gross ton from January. According to the American Metal Market’s article by Sean Davidson “Chicago Scrap Market Among Feb.’s Strongest“. It is believed that Chicago is the strongest scrap market for ferrous scrap this month because mills didn’t want to risk pushing prices to0 low and not be able to fill orders. The scrap markets settled lower by $9-$10 a gross ton depending on the grade. One commodity of ferrous scrap that settled sideways from January to February was Machine Shop Turnings at $240 per gross ton. Both No. 1 Busheling and No. 1 Bundles are down $10 per gross ton.  The strength of Chicago’s scrap metal market could be due to a number of factors. One of them being weather  and other sources believe there were higher than expected prices in Chicago because mills were beginning to recognize there was not a lot of scrap in the market.

Although, I am not happy about the decrease in Chicago’s scrap market for the month of February, I am glad Chicago was among February’s strongest markets! For any information on Chicago Scrap Metal pricing, please contact us at B.L. Duke!

metalpileAfter a lot of volatility over the past six months, reports are showing that ferrous scrap prices are expected to stay fairly stable during the month of September. Some dealers have even predicted a slight increase in the market, which means the scrap industry can sit back and enjoy a little bit of calm — at least through the rest of this month.

With recent demand from domestic mills at stable levels and increased sales to export markets, the scrap market remains flat in the short term and charts a strong course for the extended future.

What is the Outlook for Scrap Prices in September?

So what’s allowing for the more stable (and possibly slightly stronger) pricing outlook? It’s at least partly due to the fact that some mills are starting to make queries and looking to take on additional tonnage of shred and cut grades. Additionally, steal prices have reached a level of consistency prompting increased orders for many mills.

Even with the prices of scrap increasing for September, there isn’t expected to be a spike like there was in August, during which many markets stated $80 per gross ton. There’s quite a bit of talk that prices could drop anywhere between $10 and $20 in September. However, with scrapyards maintaining much lower inventories, mill buyers will have to make sure they secure deals so they’re able to get the scrap they need.

There are currently two major wild cards that could actually push the scrap market up higher:

  • Having a lower water level on the Mississippi River is actually restricting the trade flow.
  • The potential labor strikes at U.S. Steel Corp. and ArcelorMittal USA could create a significant increase in demand due to electric-arc furnaces that rely solely on scrap as their way of charging.

Time will tell what we can expect in terms of future scrap prices, but at present the market seems to have evened out after the recent turbulence.

fieldWith world demand for copper declining thanks to the uncertain economic climate, copper prices are falling as well. Japan, one of the world’s leading copper consumers, has seen shipments drop 8.1% from this time a year ago. Other signs of economic slowdown that are keeping copper prices low include low growth in China and the continued euro debt crisis.

China, the world’s largest copper consumer, has seen six straight quarters of weakened growth and little demand for new copper. There has also been a noticeable decrease in exports to the European Union. Thanks to the debt crisis and Greece’s unstable stance in the European Union, exports have dropped the most since October 2009. Services and manufacturing in Europe also shrunk for the sixth straight month in July.

The Forcast for Copper in the Near Future

Prices for copper delivery in December are hovering around $3.46 a pound, and on the London Metal Exchange a three-month contract fell half a percent to $7,580 per metric ton. Many analysts are worried that these low prices and the lower level of exports are signs that the global economy has not turned around.

A positive sign for the copper market — and the global economy as well — includes a stronger-than-expected housing market in the United States. New construction in the U.S. housing market generates approximately 40% of copper demand. Coming out of a several month low, the rebound in the housing market could change copper prices if there is continued growth.

The Long-Term Copper Market is Expected to Remain Strong

In the long-term, prices should remain steady and have the possibility to increase thanks to a move made by BHP Billiton, the world’s largest mining company. The company announced that they are putting on hold an expansion of the Olympic Dam mine in Australia. This project would have increased the world supply of copper drastically. It was expected that there would have been a fourfold increase in copper, producing 750,000 tons a year. This increase would have flooded the market and driven down prices even further. However, after seeing profits recently dive 58%, BHP Billiton decided against the expansion.