We Wish It Were That Simple…
The question of prices always comes up, and if oil rises, do scrap metal prices rise as well? Or if scrap prices are going up, does that mean oil prices will rise? Great questions to ask, but not always an easy one to answer. Perhaps 10-15 years ago, the answer would have been easier to answer, as the markets seem to go hand-in-hand. That isn’t the case today.
What is the relation between scrap and oil prices?
The price of scrap does not always weigh on what happens with the oil market, but it certainly can’t hurt. You have to think that all types of transportation, preparing of materials, both new and used and anything else with moving scrap will be affected.
When you hear about oil companies and their projects being put on hold because of the oil prices falling…that means they will need less metal for new projects, and that’s one part of how scrap prices are affected. Oil prices will not always help the scrap market. In fact, in recent years, the two have not correlated all the time. Just because one price goes up or down does not mean the other will follow, and you have seen a seesaw effect over the last few years.
What commodities prices will change?
Oil prices rising will generally cause metal prices to increase, but not for all of them. Gold prices often rise when other commodity prices fall because gold is traditionally looked at as a stable metal and can help provide some stability to the markets.
Whether prices are going up or down for scrap, it’s still important to simultaneously see the prices of other commodities. For example, if scrap prices are increasing, you will occasionally see oil prices increase, but that will also mean food products will increase too. With the oil prices increasing, that means everything that requires transportation will also increase.
If scrap prices or oil prices are decreasing or there is uncertainty in the economy, investors will generally invest in steady commodities like gold, and gold prices will increase. Be sure to stay tuned in with the iScrap App Weekly Reports for scrap prices and where the market is headed.