Although the first quarter of 2016 has not seen the severe price drops of just a year ago, and just because January and March prices were up and February was essentially sideways, it does not mean the worst is over for the industry as the annual convention of the Institute of Scrap Recycling Industries approaches.
Scrap companies are still facing their greatest challenges since the Great Recession helped to lower prices nearly eight years ago. Like then, it will take a steady hand, strong vision and smart maneuvering to navigate the continuing rough waters, testing the mettle of many in the industry, both long-timers and newcomers.
Ferrous prices fell off between more than $180or more than 50 percenton average by the end of 2015 vs. January of last year. The start of this year has not offered any significant upward momentum, and many scrapyards continue to find themselves cutting back on hours, laying off staff and wondering how to survive this latest downturn.
Ferrous scrap has the fluctuating export market and import and alternative irons competition to contend with; beyond this, consolidations, mergers and mill vertical integration of scrap sources continue to present challenges; and scrap faces challenges on the environmental regulations front and governmental efforts to reign in theft and fraud efforts.
Add to that the developing concerns over steel mill business and business practices are often straining to keep up with the next problem. But those businesses that have and continue to be steady rather than mercurial succeed despite these challenges. Practices including a willingness to innovate, to stress efficiency and safety, and to invest in new technologies and strategies contribute to the ability of a scrap venture to survive, thrive and stay alive.
Scrap usually is a high-volume, low-margin business, which means that moving a lot of material through the yard cheaply and efficiently is critical. When demand is low and scrap is in short supply, that can be a difficult objective to sustain. However, the difficulty should not stand in the way of moves that will improve those aspects of the business. One of the most important skills needed in running a thriving scrap yard is being able to manage the business through the cyclical periods of declining revenue. That means anticipating market trends and making investments that make sense for todays environment and tomorrows opportunities.