10_23_15_sickindustryWhat’s Going On In the Market?

We’re going to be straight with you—the metal industry is a little ‘sick’ right now. Rather than brushing it under the rug, let’s talk about it and explore what’s happening in the industry right now and how it is currently affecting our prices. Basically, there are 3 major factors coming into play (plenty others out there, but these are pretty big):

  1. Supply & demand
  2. Commodities market (gas and oil prices)
  3. Currency strength

Some of these factors may seem counter intuitive, since we love seeing gas prices fall and a strong US dollar is good. Most of these problems stem from economic slumps in other countries which directly affects how much and how often we can trade. The prices of metal often fluctuate with the commodities market, so when gas prices fall, so do ours. Unfortunately, it’s something that is out of our control, but we can promise you that we are still giving our customers the absolute best prices in relation to the market.

If you have metal, we want it.

The article referenced below was written in March, right when things started rolling downhill. This means that we’re enduring the worst of the storm right now, and the sun is just over the horizon. At the very least, stop by to say hello and start a conversation with us about it. Our door is always open to a friendly face!

The following are excerpts from a long and detailed article about these problems. Please visit the article here to read in full.

For scrap metal processors, 2015 has gotten off to a difficult start and that follows pretty challenging conditions last year. As oil prices drop other commodity prices also tend to drop. We’re seeing that, especially on the nonferrous side with copper prices dropping sharply. As energy prices drop, that also has an impact on energy sector investor, demand for steel and ferrous scrap. The crash in oil prices also reflects a lack of confidence in global economic growth. In addition, there’s concern about excess commodity supply, especially with iron ore, oil and other commodities. So we’re seeing expectations for slower global growth and excess commodity supply across a range of commodities. The other thing we are combating is a much stronger U.S. dollar in recent weeks. That makes our scrap that much more competitively priced in overseas markets and makes imports cheaper as well. Also, when primary metal prices come off like we’ve seen with refined copper, iron ore or other primary metals, that makes scrap relatively less attractive as well. In overseas markets I think it’s going to be an uphill climb in the near term at least.

—Joe Pickard, chief economist and director of commodities for ISRI

As a buyer and seller of scrap metal with 54 processing facilities in the U.S., you would think it would be great that if the price of petroleum goes down, our costs go down. We have fleets of trucks and processing equipment that run on gas and diesel, but the truth of the matter when prices go down it’s an inherent disincentive for people to sell scrap and get it into the recycling sector. People tend to horde material waiting for higher markets. We’ve always been bailed out by the markets. The scrap metal industry usually thrives in inflation and gets hurt in deflation.

—Bob Stein, senior vice president of nonferrous marketing at Alter Trading in St. Louis

Regardless of the cost of energy, when you have an oversupply of domestic scrap, coupled with a slowdown in domestic steel production, you are going to see scrap prices fall. I think it’s going to be bad for the next six months before things start up-ticking. I don’t see the dollar weakening any time soon. With an unstable world economy, the U.S. is still a safe haven to put your money.

—Frank Goulding, vice president of ferrous marketing at Newell

Full Article Here >>