Infrastructure is a big word, and it brings ample opportunities to the scrapping world, but how will that affect the prices and markets?
Infrastructure Affecting Prices
The bottom line is that we’re not expecting much market movement when the $1.2 trillion infrastructure bill gets pushed through Washington, DC, and here’s why. This bill has so much money, but the amount earmarked for many projects, including copper, aluminum, or steel, will not be as much as you think. They are talking about only $400-700 billion of the actual bill to be spent on physical structures like roads, tunnels, and bridges (if you’d like a good breakdown of what’s in the bill, check this out). While that’s still a massive number, let’s think about how it will be spent, and then you can see where the actual metal used comes into play.
Physical Infrastructure
Bridges. Tunnels. Guardrails. Railroads. These things will be worked on throughout the US over the next few years. Though there’s a lot of metal to be needed in all of those projects, looking at them, more money will be poured into the labor to make these advances than the actual metal used.
Steel is commonly scrapped when rebuilding bridges, but we have also seen massive steel-related waste. For example, the old Tappan Zee Bridge in NY/NJ was replaced a few years ago, and instead of scrapping it, they exploded it, and it’s still sitting at the bottom of the Hudson River. We have seen that the price for removing, cutting up, and recycling the steel doesn’t mean labor is involved, which becomes a significant problem.
When considering the metal needed for these projects, you must consider tonnage, timelines, and overall price. Much of the steel used will be made and manufactured here in the U.S. While expensive; this creates better compliance for long-term sustainability and bridge longevity. However, the price for the new steel will be drastically higher once inflationary rates, labor increases, and transportation are factored into getting the latest pieces from the factories to country-wide installation.
Prices for Scrap
These large projects will need a lot of metal. Still, the money that will be involved will skew towards more labor than materials, and this is why we are not looking at the scrap markets as having drastic increases due to this infrastructure project(s). Many other factors could affect the pricing of scrap steel, but this will not be one of them. Suppose you want to be able to look at longer-term price increases. In that case, we suggest looking more toward manufacturing numbers for large companies that supply electronics, phones, building supplies, or day-to-day tool uses. These demands are more steady and reliable over time and will create a further pricing increase for the metals markets.
Oil will also become one of the driving factors for steel prices to increase or decrease, depending on worldwide consumption and demand. As fewer people traveled in 2020/2021 (2022 saw an opening of borders that helped boom back), the oil prices have dramatically impacted the scrap markets. We know that transportation costs have changed (and probably will never go lower again), which has changed how goods travel around the country and the world. These changes will shift to the taxpayer regarding road and infrastructure work over the next few years.
Suggested Read: Why Do Oil Prices Affect Scrap Prices?
Looking Forward
If you want to get involved in any scrap projects that could come out of the infrastructure bill, you may want to think twice about this. Larger companies will handle these projects and already have the scrap worked into their bids. For extensive projects that could generate a lot of scrap metal, you will see even the government auctioning off this material to help recoup money for the taxpayer. If you are in a position to compete against dozens of other people and companies, you may have access to these projects and the scrap that is involved. We don’t want to burst your bubble, but what we’re trying to tell you is: do not bet on seeing much of this scrap coming into the market for anyone outside of publicly traded scrap companies or those who are doing the infrastructure work (and that includes 99% of the scrap yards in the country).
