Spiral of Steel Continues, New Guest This Week – 6/8/22

Posted on by Tom Buechel

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Yikes!

It looks like it’s going to become a long summer fueled by high gas prices and upset scrappers. After listening to many economists over the last few weeks we have learned about the oversupply of steel across many areas of the country. These over supplies inside of scrap yards have been due to a large push for new buildings and large demolition projects taking place.

With these prices dipping down again another $20 per ton over the last week and a half we have continued to see the decline in the scrap iron market. These prices are going to be pushed down for the foreseeable future and many of the things that we will continue to reference will all go into the oil prices.

Weekly Energy Column by Marc Champagne

This week, we are excited to bring a new column to the report from Energy Economist, Marc Champagne. With a background in policy and supply/demand, Marc is going to be providing inside looks at how fuel is affect scrap metal.

It seems like gasoline and diesel prices have only been going in one direction for the past few months. Even more concerning, they have accelerated their creep up in recent weeks as we enter peak driving demand season. Refineries are continuing to produce lower diesel and gasoline volumes now than before the COVID-19 pandemic. It is estimated refineries are operating somewhere between 5-10% less capacity now vs. 2019. It may not seem like a big percentage, but it certainly is a driving force keeping diesel and gas prices at historic highs.

How Ukraine Has Affected Gas

The Russia-Ukraine conflict has also materially impacted gas and diesel prices in the US due to crude oil being the input needed to produce such refined products. Last week, Europe decided to ban most oil imports from Russia by the end of the year, which means Europe will need to find other counterparties to buy oil from. With much of Russia’s oil supply not wanted anymore from the EU, this naturally creates a tighter supply market for crude, thus keeping the purchasing price high for crude, which refiners are handcuffed to pay in order to produce refined products like gas and diesel fuel.

Global Supply, About To Get Intervented?

Given the current global supply and demand imbalance, shrunken refiner capacity, and that summer driving season upon us, I wouldn’t count on any relief at the pump in the near term. There could be some policy intervention at the federal and state level but don’t hold your breath on having any policy provide any long-lasting reprieve for your wallets. 

Non-Ferrous Prices & Market Status

  • Copper – SELL

  • Aluminum – HOLD 

  • Brass – SELL

  • Copper Wire – SELL

  • Stainless Steel – HOLD

With copper prices rebounding last week we saw a very nice jump in the market back to the mid-levels that we saw about two months ago. These prices not only jumped up but also stabilized and many think that it’s due to the fact that the Chinese returned back to work. After returning to work and starting to unload some of the ships and process materials we are seeing a further uptick for these materials.

This has been a very difficult time to be able to help predict and understand where the metals prices are with all these recessionary talks going on throughout the world. One thing that we try to look at is the employment numbers and it looks like we continue to have a low employment rate after all of the restrictions have been lifted and many stimulus payments have been stopped.

Having more people back to work both in the US and abroad will continue to lead to more and more goods and services being needed with a heavy emphasis on the goods portion of them. The more stuff that people buy means the more metal that will be needed and we will continue to see the Recycling stay strong. 

Non-Ferrous Price Chart of the Week

 

Ferrous Prices & Market Status

  • #1 Steel – HOLD 

  • Shreddable Steel – SELL

  • Light Iron – SELL

  • Cast Iron – HOLD

  • Complete Car – HOLD 

With iron and other recycled steel prices declining about 60 to 70% from the highs that we saw a few months ago we never want to toot our own horns, but we did say that these prices were unsustainable because of the quick run-up. That being said, we do expect to see the summer very slow when it comes to recycling because of many oversupplying scrap yards across the country right now.
 
But we do expect there to start to be a kick at the end of the summer going into the fall. One of the problems is that that means we have three months of lower prices and that may be something that you have to get used to and rethink how often and how many times that you touch material. 
 

Ferrous Price Chart of the Week

Catalytic Converter Prices & Market Status

  • Catalytic Converters – SELL

We’ve not seen much of a change over the last week in all three major pricing markets for catalytic converters. With the national average taking down just a couple of dollars per catalytic converter, we did start to see small weakening demand over the last few weeks. Going into the summer this should not be a surprise as the supply chains in the fuel problems continue to hamper in effect everywhere and everyone. 
 
With the prices being weekend on the trading side of things, the team at www.RRCats.com has been able to boost their prices on catalytic converters while continuing to hold prices for 10 business days. Give the team at www.RRCats.com a chance to show you how smooth a transaction you can have with free shipping on all OEM catalytic converters.

Other Metal Markets: 

The demand for nickel seems to be ticking up as the electric vehicle markets continue to excel their growth through all these different automakers. The problem is that there is not a healthy nickel supply to be able to quench the electric car thirst that many members of the government are trying to push on the American people. We would need to increase our production in the United States by fortyfold just to be able to produce enough nickel inside of the United States to provide half of the metal for electric car batteries.
 
What does that mean? That we are so far away from being able to fully have an electric society with enough sustainable energy and rock commodities to supply the demands of the auto sector.  This does not even count all of the outside sectors like electronics, medical devices, and other gains and technologies that will need these crucial metals to build the batteries. These are many things to keep in mind when they talk about the electrification of the country and how far away we actually are when you compare the demand for metal versus the supply of metal. 

Thank You.

We have a couple of videos and podcasts that feature some interviews with family inside the Scrap business and with Scrappers. If you’re looking to be featured, interviewed, or even interview any of the people at iScrap, let us know so we can get it together.

– Tom

 

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