Prices of Scrap Metals are always very important to the scrap recycling industry. When scrap prices are in a downward trend for a long period, recycling rates decrease with the trend and scrap metal firms struggle to make a profit. The current scenario is exactly the same as scrap metal firms are getting hammered across the globe due to all-time low scrap prices.
Scrap Prices Are at All-Time Low
2015 was a disaster for scrap traders and recyclers as throughout a year of continued downward price movement across the metals.
According to BBC, prices of scrap steel are around half of what they were at the start of 2015. In August 2015, the prices of car scrap metals in Wales were between £50- £60 where prices of the same scrap metals were around £100-£110, £120-£125 and £140 in 2014, 2013 and 2012 respectively. This demonstrates that while 2015 was harsh, the downward trend has been in progress now for a number of years.
Prices of some scrap have gone down even more than 70 percent over the last 12 months. Andrew Jacobson, one of the owners of All Metal Recycling in Franklin Park, buys steel scrap for $50 per ton which is more than 70 percent less than the price he used to pay a year ago. Jacobson told CRAIN’s Chicago Business, “I think everybody is hoping for a gradual price increase.”
The reality has been harsher. “There's going to be a continued thinning of the herd,” cautioned Brad Serlin, president of Cicero-based United Scrap Metal, in the same article.
According to Bloomberg, over the past year on the London Metal Exchange, price of scrap zinc has fallen to 1,568 per metric ton (29 percent down from a year ago). Prices of scrap copper and scrap aluminum are 26 percent and 20 percent down and selling now at $4,609.50/metric ton and $1,473/metric ton respectively.
“I've seen high markets. I've seen low markets. For some reason, this one feels the worst of them all,” Jeffry Gertler, CEO of Scrap Metal Services, told CRANE3.
According to statistics gathered and summarized by the Journal of Commerce, exports of scrap metals from the U.S. dropped 4.7 percent in the first half of 2015 compared to the first half of 2014.
Reasons Behind Continued Falling of Scrap Prices
Reasons for the precipitous drop are multiple. Great Falls, Montana-based Pacific Stee, and Recycling is headquartered in Great Falls and has branches in nine western states. “There are a lot of dynamics involved,” Patrick Kons, vice president of scrap operations for the company told the Great Falls Tribune. “These are global commodities with cyclical prices.”
Joe Pickard, chief economist at the Institute of Scrap Recycling Industries in Washington, D.C, told CRAIN, “The stomach-wrenching swoon in metal prices is driven by the slowing Chinese economy, a strong dollar that makes exports less competitive and excess supply in commodities such as iron ore, which steelmakers can use to make steel instead of reusing scrap.
Impacts of Falling Scrap Prices
Many firms and people who are in the scrap trading and recycling industry have already left their business, many have cut their employees and some are stockpiling scraps hoping for a market turnaround.
Pacific Steel and Recycling’s Great Falls, Montana scrap yard is down to just seven employees which is half the number of employees the scrap yard had about a year ago. The company has also closed down a couple of its recycling plants in Lewiston and Williston.
Chance of Quick Turnaround is Low
Kons believes that metal prices have bottomed out and will begin to slowly improve over the months ahead:
But it took 14 months for prices to fall so much and it might take that much time or longer for them to come back. But each supplier has a price point where its yards fill up and they need to sell. We want to stress that our recycling scrap yard is open and ready to serve them.