Copper Has Dropped 40% This Year – 7/13/22

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Markets, oh Markets…

Not talking about Scrap for two weeks seems to have jinxed the market as we have seen the most significant decline in three months over ten years. We have started to see the signs of federal reserves interest rate hikes kicking in, and that can be illustrated by many commodity prices falling so dramatically.

On top of that, you can add that it is the middle of the summer when things generally slow down, to begin with, and we’re seeing that happening right now. We have seen all commodity prices over the last two weeks either not move or decline, with copper being one of the biggest problems. One of the things that we started to take away from our energy economist is that the market’s short-term pullback is still not reflecting the long-term sustainability problem from a fuel perspective, ultimately hurting the markets.

The view above of old oil fields demolished and replaced with solar panels.

This Week, Let’s Talk About Electric Vehicles a Bit More

Energy Column

For the first time in a long while, we see gas and diesel prices trend downward. Even more surprising, this price drop occurred over the July 4th holiday, one of the busiest driving weeks of the year. How does that make any sense, you ask? Well, input costs for gasoline and distillate production have begun to fall. Crude oil prices have cooled off, which appears to be a good thing on the surface. However, there are some indications in the market right now the primary reason for the oil price drop is due to heightened fears of a recession. Certainly not the reason we like to hear for prices dropping, but with inflation not going anywhere and the Fed’s plans to continue to raise rates, the probability of a recession continues to climb. 

We wanted to expand our energy coverage this week beyond gasoline and diesel price movements and begin to focus on the relationship between energy and metals. We’d like to start the discussion focusing on coal’s recent usage growth due to the need for here-and-now power. Energy security, particularly in Europe, is on everyone’s mind. The climate transition has taken a backseat, and Europe has increased its coal usage by 13% this year after years of decline. This is primarily driven by the continent’s limited energy choices, given its severed relationship with Russia. However, this means mining companies see more value in coal mining as demand has rebounded and, in some cases, has become part of a temporary energy security framework for countries. 

Mining operations have shifted from precious metal extraction and refining to coal extraction. There is no doubt that metals like copper, lithium, graphite, and aluminum will continue to be in demand as the world looks to ramp up the energy transition through electrification, EV production, EV charging infrastructure buildouts, and installing more on-shore and off-shore wind and solar farms. 

Focusing on EVs for a moment, the chart below from the IEA shows just how much EVs rely on precious metals. 

Types of Minerals used in cars

We believe it’s essential to keep a close eye on these metals’ supply and demand balances as timelines and energy sources continue to shift due to geopolitical instability, inflationary pressures, and political agendas. More to come on this front in the coming weeks…

Non-Ferrous Prices & Market Status

  • Copper – SELL

  • Aluminum – SELL

  • Brass – SELL

  • Copper Wire – HOLD 

  • Stainless Steel – HOLD

Three weeks ago, we had a national average for stripped copper wire hovering around $3.70 per pound. Today we have a national average below $2.90, and that market may be moving downward even more. We have seen rising interest rates and significant fears of recessions taking over much of the market controls, which is why commodities have fallen so quickly. There are tricky items to sell; similar to what we saw in the steel and iron markets; super large drops happen very quickly. 
 
The nickel prices have been battered down from $28,000 per ton to below $22,000 per ton, and the demand for stainless steel has grown in the last few weeks. The good news is that many people are projecting that this significant pullback will not stick forever, but like the steel Markets is going to her on the way down. 

 

Ferrous Prices & Market Status

  • #1 Steel – HOLD 

  • Shreddable Steel – SELL

  • Light Iron – SELL

  • Cast Iron – HOLD

  • Complete Car – SELL

We may finally be seen a little resurrection in the steel markets with some buyers talking about the overseas the man is picking up. After a significant market decrease over the last 3 1/2 months, we are starting to see the exports picking up some shipping situations slowly improving.
 

Boosted Catalytic Converter Prices at RRCats

Catalytic Converter Prices & Market Status

  • Catalytic Converters – SELL

We have been happy to see a stabilization and an increase over the last week and a half in the catalytic converter markets. Overall, we saw gains for palladium and platinum, but those were partially erased over the previous few days. Going into the third quarter, we do not expect a crazy run-up in prices on the catalytic converter, but there continues to be no reason to hold them, especially when you can get free shipping and a price-lock for ten days through RRCats.com

These markets are nothing to be excited about now, but if you continue to move material or hold onto your high-grade items for six months to 12 months, you may see a recoup on these market prices. Overall we’re not seeing a significant increase coming back anytime soon, especially if the federal reserve continues to raise interest rates.

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