bw_beach“June Gloom” is a term most often used to describe an early summer weather pattern in Southern California.  In the case of Chicago-land’s June scrap metal market I believe “June Gloom” is particularly fitting.  After March’s price increase, we have experienced two consecutive months of declines and unfortunately June appears ready to produce much of the same.  All indications that we are receiving at B.L. Duke point to the ferrous scrap market in Chicago declining $10 – $20 per gross ton across all categories.

Everyone in the industry was hopeful that May’s low prices would be the bottom of the market.  Given that prices are set to fall once again, where exactly is the bottom of the market?  When will the bleeding stop?  The U.S. economy as a whole has shown signs that it is slowly improving and the worst is behind us.  Just Monday, Federal Reserve Bank of Chicago President Charles Evans, was quoted in a Bloomberg article, that the economy has improved “quite a lot.”  “I’m optimistic that the labor market has been doing much, much better and that unemployment is going to continue to go down.”  If it no longer appears the domestic economy is holding scrap pricing down, it is my opinion that it is simply the law of supply and demand at work.

According to Scrap Trends Outlook, vol. 4, no. 5, domestic mill demand shows an expected drop in the need for scrap.  Mills are expected to seek less scrap than they did in May.  This information is particularly discouraging because the scrap supply continues to rise.  The U.S. East Coast export market has come to a crawl.  An American Metal Market article stated, “U.S. East Coast bulk ferrous scrap prices fell to a three-year low this past week as Turkish mill buyers continued to hammer down prices.”  With importing countries such as Turkey, India, and Korea in no rush to buy U.S. ferrous scrap metal, our domestic scrap metal will continue to remain under pressure.  Until scrap supplies begin to tighten significantly, there is no reason to believe that prices will increase with any strength.