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Metal Market Report | January 2017

 

Ferrous:

 

The new year ushers in another positive month for ferrous scrap prices, the third consecutive month of increases, but the jury is still out for the remainder of Q1 2017.  Multiple factors will determine the direction of our economy in the new year and there are definitely two schools of thought on the impact of President-elect Trump’s new agenda.

 

On one hand, many view Trump’s direction as ill-advised with the eventual risk of inciting trade wars.  He has specifically targeted China for steel dumping and continuing to build up their massive steel capacity that has caused high levels of unfairly traded steel imports. They have also looked to circumvent trade restrictions by dumping their low cost products through neighboring counties and ultimately into the United States.

 

On the other hand, a sizeable faction of others view Trump’s direction as a “new hope” with plenty of political clout to create inward business migration, new ventures and increased manufacturing, additional higher paying jobs, mill restarts, a revitalized infrastructure and more. The recent price increases seem to be fueled by optimistic outlooks, promised infrastructure spending, and swelling price hikes on steel or rumors of price hikes rather than overwhelming demand.

 

Steel-intensive industries including construction, heavy equipment and infrastructure should improve over the course of the next two years, but look for the improvement to begin slowly and increase gradually. If history has anything to teach us, when prices swell too quickly without the demand base necessary to support it, a price retreat is in the near future. Only time will tell if this recent price hike will remain buoyed up by demand or if it will resemble the pricing seizures we have seen in years past.

 

Rumors are starting to emerge that ferrous scrap prices may plateau in coming weeks as weaker scrap exports could be further hampered as the dollar value will most likely continue to climb.  A stronger dollar bodes well for the U. S. economy overall, however it will cause ferrous export demand to suffer as U.S. ferrous scrap will simply become more expensive to many key export destinations. With less competition for steel scrap, domestic mills will use their leverage to begin manipulating scrap prices unless scrap flows received are softer than anticipated.

 

Non-Ferrous:

 

December was a settling month for most base metals after the whirlwind of activity following the markets shocking election results. Copper prices saw moderate gains throughout December while aluminum and nickel prices saw a slight retreat from November’s above average prices. Lead and zinc prices continued their strength trend finishing the year up 31% and a whopping 75% higher respectively.  Gold and silver both tracked together into negative territory during the past 30 days due largely to a stronger dollar and an interest rate hike. Ferrous scrap prices gained 15% month-over-month and currently sit nearly 45% higher this January compared to prices in January 2016.

 

As of October 12, 2016 % Change
COMMODITIES  September Ave. 30 Day Change (December) 6 Month Change 12 Month change
Copper Comex ($/LB) $         2.56 4.1 15.8 23.1
Aluminum ($/LB) – LME  $         0.78 -0.3 6.0 15.4
Nickel ($/LB) – LME  $         4.99 -1.2 7.3 26.6
Lead ($/LB) – LME  $         1.01 3.1 21.7 31.2
Zinc ($/LB) – LME  $         1.21 4.3 22.2 75.4
Gold (LB/OZ)  $  1,151.00 -6.8 -13.9 7.7
Silver ($/OZ)  $       16.41 -5.4 -17.8 17.2
Crude Oil ($)  $       52.16 -13.8 -16.4 39.8
Nov\Dec Change 6 Month Change 12 Month Change
Scrap Steel Prices – No. 1 Heavy Melt (Intermountain west) 15.3 22.1 44.6
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