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Metal Market Report | October 2016

Ferrous:

October is another “spooky” month for the ferrous markets and a Déjà vu of the price weakness we saw firsthand last autumn when prices plummeted to levels previously seen during the 2008 market collapse.  Unfortunately, the market is very unhealthy again and is suffering from many economic factors.

 

One of these factors is the large scrap supply overhang in the markets. With little export demand, domestic mills have a buffet of overstocked scrap grades to choose from with no sense of urgency to replenish. As a result, mills are able to pay the bare minimums needed to secure their limited tonnages.  This leverage has aided mills to enjoy sky rocking profits this year on the backs on their suppliers.

 

Another factor weakening scrap prices are the concerns over cooling new steel sales forecasts for the coming months and lower mill utilization rates. This has mills going in contrasting directions. On one hand they are discounting prices on future orders to stimulate business, while on the other hand they are trying to raise prices to force a new price floor. This is obviously causing a lot of confusion and sickness in the market until a natural equilibrium is realized.

 

Further fanning the flames is the continued dumping of cheap imported steel into this country despite the legal measures taken to stop this. This has caused enough market turmoil that it has made both presidential debates but it’s unlikely to be solved quickly regardless of which candidate wins.

 

November and December are typically slower months anyway, and the remainder of 2016 could be hampered even more with mills attempting to reduce their inventories to bare bones for annual maintenance outages and to simplify yearend bookkeeping.

 

Non-Ferrous:

Base metals saw a mixed outcome in September with aluminum and nickel losing a couple cents per pound, while copper bounced up and down but settled the month at similar price averages.

Lead and Zinc continued their price growth trend. Strong lead battery demand due to strong auto sales have helped keep lead prices In the green this year – up over 13% from prices this time last year. Zinc too is seeing very strong demand and prices have surged 25% from last year’s levels.  Average oil prices remained relatively flat in September but are up 9% over the past 6 months. As mentioned above, scrap steel prices have been hit hard, down 14.5% from September levels and down 33% since last spring

 

As of October 12, 2016 % Change
COMMODITIES  September Ave. 30 Day Change (September) 6 Month Change 12 Month change
Copper Comex ($/LB) $         2.14 -0.1 -2.0 -10.9
Aluminum ($/LB) – LME  $         0.72 -2.8 1.4 0.0
Nickel ($/LB) – LME  $         4.62 -1.5 13.0 2.8
Lead ($/LB) – LME  $         0.88 5.7 11.4 13.6
Zinc ($/LB) – LME  $         1.04 1.0 19.2 25.0
Gold (LB/OZ)  $  1,325.00 -1.1 6.3 15.2
Silver ($/OZ)  $       19.29 -1.1 15.4 23.5
Crude Oil ($)  $       45.23 0.7 9.1 -0.5
Sept\Oct Change 6 Month Change 12 Month Change
Scrap Steel Prices – No. 1 Heavy Melt (Intermountain west) -14.5 -33.1 -11.3
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