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Report Date: 7/27/22
With the markets starting to react to the looming Federal Reserves increase in the interest rate, we have started to see metal commodities (and stocks/bonds/crypto/gas/oil/groceries) do all of the opposite effects that we would want. We usually enjoy the metals going up, but we may be seeing what the newly established bottom floor is.
After speaking with a metals trader this week, he pointed out that we say copper trading prices are above the $4.00 trading mark for a total of 14 months. This has never happened in that long of a period and made many people get used to these new prices- and that is where we start to have problems that we will go over more below.
Energy Column – Oil & Gas Prices
Rise like a rocket, fall like a feather. This is a commonplace saying about retail gas prices, and we live these words now. Prices for all refined products are slowly retreating further from their June highs but still carry a far more inflated price than we were used to paying a year ago. Some good news from the crude market is that the number of barrels produced rose by 3.5 million to 228 million, signaling that low demand led to growth in inventory stockpiles last week. If crude continues to grow in inventory, we may continue to see prices fall like a feather over the coming weeks.
We Saw a 10% Decrease in Fuel Compared to 2021
Coupled with the rise in crude barrel inventories, driver demand for gasoline has continued to fall. Drivers ended up pumping 10% less fuel in the week ended July 9 compared to last year. This is a significant drop considering we are in peak driving season. If consumers continue to say no to high gas prices by simply not filling up, expect to see continued downward momentum moving into the Fall months.
As promised last week, let’s take a solar. The only issue is that the world is almost entirely dependent on China to supply the base metals used in solar panel production, and the IEA expects that will remain the case through 2025. That could be a problem if solar demand continues and China’s polysilicon manufacturers aren’t willing or able to increase production sufficiently. In addition to polysilicon, here is the breakdown of minerals needed to produce solar panels from the IEA:
And by energy technology, its obvious solar is the clear winner for aluminum needs:
Although copper is still an element in solar production and is needed for electrification, aluminum is the primary material required when building solar panels. The expected demand increase for solar farm build-outs is enormous. China, for example, installed a record 54.88 gigawatts of solar capacity last year.
China Is Winning The Solar Race
And in 2022, Chinese officials expect to double that figure, installing 108 gigawatts of solar power nationwide. Corporations worldwide also purchased a record 31 gigawatts worth of clean energy through long-term projects in 2021, with two-thirds of the spending going toward solar. As China leads the solar capacity race, they also lead in producing such materials needed to make the panels. The below chart from EnergyThunder helps to lay out just how reliant the rest of the world, including the U.S., is on different materials and minerals needed for the energy transition.
Next week, we’ll do a deep dive into wind energy. Stay tuned…
Copper – SELL
Aluminum – SELL
Brass – SELL
Copper Wire – HOLD
Stainless Steel – HOLD
As we discussed in our opener, copper and other metals prices have sharply fallen (back to reality) over the last five months. Traditionally we have seen summer lows always taking place- but this summer may be different. With such a domino effect lingering from the previous 2.5 years of disruptions, we have seen metals falling back to more reasonable levels for long-term sustainability.
We do not often mention that- while we all love higher prices, we are all consumers at the core. Buying food, tools, cars, and “stuff” is only the start. Those things we buy all have metals and energy that get poured into them to create the things that we buy. The big run-up in metals during the end of 2020 and into 2021 has started to rear its ugly head as all of the things we are buying reflect those higher prices from a short 6-18 months ago.
Non-Ferrous Scrap Prices
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#1 Steel – SELL
Shreddable Steel – SELL
Light Iron – SELL
Cast Iron – HOLD
Complete Car – SELL
Well, it looks like the steel ride may be over for the time being. We have seen pricing on steel fall flat- and just as we saw a little breath of life going into the markets a few weeks ago, that seems to be unfolding now. Steel demand is there, but the incredible amount of scrap flowing into mills and furnaces worldwide is still reflected in the markets today. We have seen higher energy costs hurting the steel market prices, which does not look to be going away anytime soon.
If you are looking for any sign of life in the steel markets, you may hold materials for a long time as there is no uptick in the markets.
Ferrous Scrap Prices
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Catalytic Converter Prices & Market Status
Catalytic Converters – SELL
Palladium prices have started to see signs of life in July, with prices climbing about 15%. Even with that increase, we are still 40% below the all-time highs we saw in March 2022…but there’s more. Traders are talking about the Russians starting to throttle back some of its rare earth metal sales (like Palladium), which may put an upward push into the markets.
The problem with that? There continue to be massive setbacks in the chip industry (shown by the current administration pumping $55 billion into chip makers), which will cause the automotive sectors to continue to have a slower push to buy the precious metals that are going into the catalytic converter industries.
The upside? Locking prices with RRCats.com gives you free shipping and a 10-day price lock on your catalytic converter prices. Find any scrap yard in the country that holds prices for ten days nowadays on anything….and maybe give the team at RRCats.com a chance today.
Other Metal Markets:
The markets may be in a new holding pattern spurred by inflationary fears, recessionary indicators, and a massive oversupply of metals from the last year and a half of higher prices. We continue to recommend selling most grades of scrap as the markets do not have much of an upside currently.
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Other Valuable Resources
- Last Week: Thanks To Turkey, Steel Continues Its Climb
- The Effects Electric Vehicles Will Have on Copper Scrap
- Rewind: Copper Prices See All-Time High, But Why?