April Brings Changes To The Ferrous Markets
Just like any other commodity, scrap metal prices fluctuate from month to month. The economic factors that can impact these fluctuations in prices are virtually endless, let's take a look at some of the current factors that could be causing a shift in ferrous markets.
Tragedy In Turkey
Turkey has been one of the largest importers of ferrous scrap for quite some time. On February 6th of this year, a massive earthquake struck eastern Turkey. This earthquake tragically caused tens of thousands of deaths and decimated thousands of buildings. This earthquake also caused several large mills in the country to halt production. Cargo ships carrying ferrous scrap were unable to get into the port and had to be diverted to other countries.
When large mills shut down, obviously the demand is going to soften. Another factor to keep a close eye on is that the widespread damage within Turkey means that the buildings will need to be rebuilt at some point. This could cause Turkey to export less of it's own product as they would need the materials to be put to use in their own country as they rebuild. Countries that lean on Turkey for rebar and other structural steel, will likely have to find other sources of supply.
Seasonal patterns also play a role in scrap metal prices. During the winter months, traffic flows into scrap metal recyclers tend to slow down due to the weather. With spring typically comes warmer weather, and the material flows into the recycling facilities will increase. This puts more supply in the market for steel mills. Pricing factors will now come down to the volume of US steel productions, and export prices, which are down ~7% in late March. Domestic mill production appears to be stable but not booming.
According to the American Iron and Steel Institute (AISI), US steel mill production as of April 1st, 2023 was 1,658,000 net tons, with mills operating at 74.2% capacity, compared to 79.1% at the end of March. This could give mill buyers leverage to negotiate lower prices or keep the prices sideways from last month.
The US economy as a whole has an enormous impact on the price of scrap steel. The economy can speed up or slow down at various speeds.
Recently, Saudi Arabia announced that they would be decreasing their output of oil production. This can have a major effect on scrap metal prices for a few reasons. Scrap metal relies heavily on transportation, as the supply of crude oil is decreased, we saw a spike in cost of gas and diesel fuel. When transportation cost go up, the buying power of scrap metal is going to decrease. Mills also consume a very large amount of energy to run their furnaces and other refining equipment. Higher cost of energy combined with higher freight cost is going to have a negative impact on what the mills can and are willing to pay for materials.
The world of scrap metal can be complex. Partnering with the right recycling company that can help you navigate these markets is key. Reach out to S&F Development today and work with a recycler that has their client's best interest in the forefront of what they do.