As we enter the Fall of 2015 the outlook for the scrap market and the metals industry in general is bleak to put it lightly. The thought was that the scrap pricing collapse that occurred in February would be the bottom of the market and we would slowly regain the loses over the remainder of the year. Clearly those predictions proved to be dead wrong but why and what can be done moving forward?
As 2015 progressed a series of factors came together to create a “perfect storm.” The three main factors negatively affecting the industry are the global slowdown, the strength of the US Dollar and simple oversupply and lackluster demand. The global slowdown led by China has driven the Asian nation to dump cheap, government subsidized finished steel products all over the world. Not only has this practice sucked any extra demand there may have been out of the US market but it has left the UK Steel Industry fighting for its life.
The US Dollar is the reserve currency for the world and when things are grim across the globe, the value of the dollar increases. This go-around has been no different. Only a year ago the Euro-Dollar exchange rate was as high as roughly a $1.40 today it is $1.11. The fall in the value of the Euro has brought scrap export off of the east coast to a crawl at best. We cannot assume that the Euro will increase in value anytime soon, it appears as if ECB is set to engage in another round of quantitative easing. We will continue to see an over-supply of domestic scrap until consistent export resumes.
Fourth quarter 2015 is looking every bit as challenging as third quarter and resembles 2008 depressed markets. Unfortunately, there is no light at the end of the tunnel. Lou Plucinski, B.L. Duke’s President, was interviewed by the American Metal Market discussing how small yards have in edge in downturns. “B.L. Duke is working hard to set itself apart, including making its business practices transparent.” Plucinski also stated, “We know the stigma scrap metal companies have, and B.L. Duke is truly revolutionizing the industry because we have brought a new level of transparency with customers with groundbreaking software systems that allow customer full access real time.”
Through transparency and consistent communication, we are working with our recycling partners to ensure we can continue to provide great service while navigating through these unprecedented markets.
For a fresh look at your recycling program contact B.L. Duke at 773.778.3000 or [email protected].