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Last year was one that most would rather forget

Keywords: Tags  2015, 2016, ferrous scrap, mills, exports, energy???

When the books were finally closed, 2015 clearly was a remarkable year in the recent history of the ferrous scrap market – and most nonferrous ones as well – although 12 months that many on the selling side of the ledger would probably like to forget.

Prices reached their high for the year right out of the gate in January 2015, but by December had dropped more than $175 on average, or about 53 percent in value. On average overall for the year, prices were much lower than in 2014, which itself had been close to 2013 prices. In fact, prices are significantly lower today than in 2011, the high-water mark following the Great Recession.

Other than January, the best thing that happened to sellers was a spring in which prices were essentially sideways for about three months before rising in June. After that, it was downhill from July until December’s sideways brake on the skids.

On the scrap buyer side, domestic mill steel production was down greatly from 2014–declining by about 9 percent–while consumption of ferrous scrap also was down when measured against the previous year. Ferrous scrap exports fell considerably last year as well.

So what will 2016 hold? Well, just like last year, January prices increased over December. But many of the issues that suppressed demand and pricing in 2015 still remain: low energy prices, which are hurting the steel tube and pipe sector; steady but slow economic growth at home; the fears of scrap oversupplies; potentially fragile economies in Europe and Asia; a strong dollar; and imported steel.

“Scrap prices will likely be range-bound for the majority of 2016 given dollar strength and general commodity softness due to China’s slowing growth rate,” said one scrap seller.

Still, most on the supply side of the ferrous scrap business are saying that they expect prices to be at worst sideways and at best up overall for the first half of 2016. In other words, a cautious optimism reigns right now, and very few in the ferrous scrap world think that the worst is yet to come.

“It will be higher, since I believe we are at the bottom, so there is no where to go but up,” one seller said.

If there is one bright spot for ferrous scrap sellers this year it could this issue, that the flow of scrap into yards may slow, creating market shortages and driving pricing up.

“Scrap dealers are eternal optimists,” said a dealer. “(But) if things do not improve, there will be no scrap dealers left.”

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