Thanks To Turkey, Steel Continues Its Climb – 7/20/22

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Copper Recovers (Slightly) & Turkey Jolts Steel Prices Up

This week we have started to see a resuscitation of the markets, with copper prices climbing by about $0.10. It’s been a welcome sight as steel prices have recovered, and some signs of optimism are starting to creep into the market. Steel prices have started to go in the right direction after Turkey started buying from the US – more on that later.

We have now seen energy prices decreasing 35 days in a row which could be a good sign moving forward into the rest of the summer. The bad part is that they are still expecting energy prices to increase towards the end of the summer or in September our economist, Marc will talk more about that. 

Energy Column – Oil & Gas Prices

As inflation keeps setting multi-decade records, gas and diesel prices continue their downward trajectory. Some estimates believe gasoline will move as low as $4 per gallon by the end of this month. Something unheard of during peak summer driving season. However, consumers are showing they have the ability to fight back against high gas prices by simply not driving as much. On the diesel side, it’s a slightly different story. Refinery production of distillate fuels is still very tight, inventories are low across the country, and diesel consumers have much less autonomy in simply choosing not to drive. We expect diesel prices to stay higher than gas prices, with consumer elasticity creating a wedge between the two products in terms of price relationship.

Copper Dropping With Anticipation

Now, on to the metals market. Let’s talk copper. As mentioned earlier, red-hot inflation has partially led to a decline in gas prices as recession fears mount, and investors believe the Fed will not be able to curb inflation without sending the broader economy into a recession. Same deal with copper. Prices are plummeting due to an anticipated economic downturn even though things have been essentially unchanged from a supply and demand perspective.

There is no doubt that copper’s value will find its footing as more renewable energies and electrification projects gain funding. However, another critical consideration is where all this copper will come from. US copper production has decreased by nearly half in the last quarter century as mining operations have shifted operations outside the US or closed their doors due to environmental and financial setbacks. On the other hand, China has been busy creating a primary position in the supply chain for minerals, including copper, to help them accomplish future net-zero carbon goals.

What does EV have to do with it?

The Biden administration’s 1 trillion-dollar infrastructure bill in the US includes aggressive plans to build the nation’s EV charging network. From a global perspective, it is estimated 20 million EV charging points will come online by 2030, which would require 250% more consumption of copper than at current levels. Even more concerning, BMO capital markets expect a 9 million mt copper deficit by 2030 globally. Essentially, demand is expected to skyrocket while supply becomes tighter.

Amount of Copper Inside Vehicle Comparison

EVs will need much more copper than traditional internal combustion engines (ICE) and hybrid vehicles. To expand on our chart from last week, we’ve added hybrid vehicles to show they still are far below in copper usage than EVs.

  • ICE vehicle: 44lbs. of copper
  • Hybrid vehicle: 88lbs. of copper
  • Plug-in EV: 240lbs. of copper

This is critical to understand as car sales shift from hybrid to fully electric vehicles. Range anxiety is a significant factor in why hybrids are still preferred by many consumers – they have a gas backup in case there’s nowhere to charge. However, as more EV charge points are built out, it is inevitable range anxiety will dissipate, and EVs will be the preferred car of choice.

We will stick with this electrification topic next week but shift our focus to renewable technologies like wind and solar to see their influence on the copper market moving forward. 

Non-Ferrous Prices & Market Status

  • Copper – SELL

  • Aluminum –  SELL

  • Brass – SELL

  • Copper Wire – HOLD 

  • Stainless Steel – HOLD 

Many articles about copper prices are starting to be written in mainstream media, which is generally not a good sign. Many people are showing that the recession possibilities and the copper prices starting to slide could cause a significant problem for the economy as we have seen comp of places dropping 30%.
 
We will closely monitor this as everyone is upset with copper prices decreasing so much, but in our opinion, these markets are still very strong overall, especially if you can pair them to the beginning of 2020 before Covid hit.

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 – SELL

Turkey started buying more scrap out of the US, so we have seen steel prices increasing. With this, declining fuel consumption will also lead to a cheaper refining method and hopefully start to see those prices creeping up. It does seem like we saw the market bottom out as a level gone for the last month and a half, which was a good sign as well.

Ferrous Price Chart of the Week

Boosted Catalytic Converter Prices at RRCats

Catalytic Converter Prices & Market Status

  • Catalytic Converters – SELL

All precious metal markets have recovered over the last few days, with platinum and rhodium having a nice bounce by about 5 to 10% each. Overall those are nice increases considering that the market is in a bit of a tailspin in all way shaped and form across the stocks and different metals.

We hope that you are doing well and staying busy. Let us know what else you want to hear about from our team so we can get that info over to you!

Thank You. – Tom

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