Don’t Delay, Hold Your Copper – 6/29/22

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Half of 2022 is Done

Last week we continued to see energy prices decreasing as we have seen gas go down 15 days in a row. Later in this report, we will have our energy economist explain more about the markets and what’s going on, and how it will affect your pricing. 

With the market continuing to be highly volatile, we have seen extreme price swings both in the stock and commodity markets. One day last week, we saw copper prices go down $0.20; that was after we saw it go down $0.10 the day prior. With these extreme market conditions reacting to different federal reserve policies and possible recessionary fears, we have seen a significant pullback in the pricing.

Energy Column – Oil & Gas Prices

Gas prices shave off about $0.10 versus one week ago. Good news, right? Well, not really when prices are still over $2 higher than last year. We wanted to focus on some interesting discussions out of Washington, D.C. this week as a federal gas tax holiday proposed by the Biden Administration is now in the hands of Congress to be the ultimate decision-maker. In addition, the administration is urging states to forego their share of tax built into the pump’s price to provide some much-needed financial relief for drivers. The big question remains will this happen, and for how long? It’s hard to say right now.

Another critical piece of information regarding these gas holiday taxes is how much they would save consumers on a per-gallon basis. The federal gas tax is about $0.18/gal for gasoline and $0.24/gal for diesel.

However, it is hard to know if consumers would see an actual savings of $0.18/gal and $0.24 on diesel fuel if the federal tax holiday was implemented. The main problem is that refiners and the oil majors are not producing more output, so they may very well raise their pre-tax prices, which would offset any tax break for consumers filling up. It all boils down to supply and demand here. There is too much pent-up demand in the gasoline and diesel fuel market right now, and refiners will not produce more to match the supply with demand. So, if this federal tax holiday passes, how much it will help people’s wallets remains to be seen.

In closing, there is still a great deal of focus on the price of gas and diesel, especially as we are into the dog days of the summer driving season. We are confident there will be more creative ways to help people with the high costs at the pump, but the looming concern always boils down to how effective it will be. 

Non-Ferrous Prices & Market Status

  • Copper – HOLD 

  • Aluminum – SELL

  • Brass – SELL

  • Copper Wire – HOLD 

  • Stainless Steel –  SELL

Well, many people are bearish on the copper market for the next few months, and we hear extreme optimism going into the future. But sometimes, discussing future markets is not nearly as important because you are looking to figure out what’s happening in today’s prices.

In the next few months, we do not expect the rapid upswing in the copper markets that we saw at the end of 2020 and throughout 2021. These large market swings that we saw were mainly due to the significant push of new money that was printed. As the federal reserve is tightening its monetary policy, we will start to see money coming out of the market, and the commodities will be heavily affected.

These interest rate increases will affect copper prices and continue hurting other metals like aluminum, zinc, and other mixed non-ferrous alloys. For the rest of this year, we expect to see very fluctuating markets as the world is trying to deal with the inflation that’s going on and other commodity-driven problems.

 

Ferrous Prices & Market Status

  • #1 Steel – SELL

  • Shreddable Steel –  SELL

  • Light Iron – SELL

  • Cast Iron – HOLD 

  • Complete Car – SELL

Not a lot of good news coming out of the steel and the iron scrap prices. We’ve continued to see these markets decreasing as light iron has fallen to an average of around $100 for a ton. These significant decreases are due not only to too large stockpiles at many furnaces but also to different valuations of currency overseas and continued logistical problems.

Iron markets have taken a reverse turn down word that was not expected at this magnitude. The good news is it looks like the markets have bottomed out as they cannot go much lower or risk having large piles starting to accrue not only in yards but also a different mills and export markets.

Boosted Catalytic Converter Prices at RRCats

Catalytic Converter Prices & Market Status

  • Catalytic Converters –  SELL

We have seen the prices of catalytic converters increasing over the last week, with prices for the average OEM approaching $150 again. We feel that the $150 per cat average will become the industry swing point that we will pivot ourselves to over the coming months.

We have seen all precious metals increasing over the last few weeks, which is very optimistic regarding cat prices. With these markets continuing to stay strong, we wait for the auto industry to catch up to the demand that they cannot seem to return to pre-pandemic levels.

Other Metal Markets:

The nickel market switch influences stainless steel prices have taken significant turns down over the last few months. We have seen the price of 304 stainless drop by almost 50% as the nickel markets have dropped about 45% over that same time. Not only do stainless steel prices rely on commodities like nickel but also iron, and as both of these metals have fallen, we have seen the pricing on stainless steel falling simultaneously. Until you start to see a steady increase in the Steel markets, we do not expect to see any significant overall increases.

Thank You.

Overall it looks like we had a fluctuational second quarter, and overall we looked to be bottoming out for prices. Many people we have spoken to believe that we have reached the bottom of the market. Still, if the federal reserve continues to increase interest rates aggressively, we may see another extensive death coming unexpectedly.

Don’t forget to check out weekly videos and podcasts on YouTube!

– Tom

 


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