One of the things we enjoy most is chatting with our customers.
These conversations are always interesting and help us to get a handle on what our customers think about our service, which helps us do a better job. These conversations are also the key to helping provide them with useful information and sometimes to suggest useful associations with other customers.
Metal prices are often a part of these conversations as customers want to understand the rationale for swings in prices. Many often wonder if they are doing the right thing by selling their scrap metal now as opposed to holding onto it for a while in the event that prices rise. Of course, the chatter always gets louder as fluctuations in scrap metal prices become more intense.
Metal Prices – Where They Have Been…Where They Are Going
China is often cited as a root cause for instability in metal pricing. In fact, the reasons for this are tough ones to tackle. We certainly are not experts in world economics but in the interests of those asking we thought we might provide some context in regard to the Chinese influence on commodity prices. In general, the global demand for scrap metal is driven by China, India, Turkey and South Korea. Global supply is driven by the United States, Japan and the European Union. China, with a population of close to 1.5 billion people and economic growth in the range of 8% to 10% year over year, (until 2019) does indeed have a massive impact on the size of the world’s demand for scrap metal and other commodities and therefore their prices.
Historically, the boom in China was powered by economic reforms that began in 1978. The scrap metal industry was a beneficiary of these reforms as the appetite for copper, steel and other commodities essential to the building of infrastructure, heavy industry, technology and housing was enormous.
This demand was so strong that it pushed on even through times when construction and manufacturing in the U.S. and other countries was slowed by recession and financial crises. Overall, we think most economists would agree that China’s economic development, especially during the early part of this century, has indeed been the greatest contributor to at least the surge in commodity prices. So our customers are right to be concerned whenever China sneezes.
After steady growth for the past several years, Chinese authorities banned steel scrap imports in 2019.The reason this move came about was that many of the grades of scrap being imported were re-classified as waste, meaning that too many impurities were found in them. As a result global scrap metal prices dipped.
However in January of this year, China reopened its ferrous scrap import market, and this, of course, coupled with growing demand across most of Asia, drove up demand for scrap. Experts are now predicting both a significant shift in the mix of imported scrap to most of the Asian markets. This, in turn, will help stabilize prices for at least the next few years. It will also lead to will lead to a significant shift in the mix of imports to China and across Asia’s steel markets.
The Supply Side
One of the more interesting aspects of these developments in China, however, is actually on the supply side. China has historically been unable to generate sufficient quantities of scrap metal within its own borders.
But as incomes have risen in China, a middle class of consumers is developing and people have begun to buy and replace cars, appliances and other recyclable manufactured goods.
There are now predictions that by 2024, when its GDP per capita is expected to reach $15,000.00, China’s metal consumption activity will peak as growth slows and they are able to source a good deal of material at home. What will happen as a result of this is unknown at the present time, but it should make itself clear over the next year or so.
An Interesting Article On The Global Recycling Demand Picture
A New Uptick Here At Home
One of the things that the slow and steady normalization of many industries in North America has done is create a fairly bright picture regarding the domestic demand for metals over the next few years.
The demand for steel with grow along with planned infrastructure, (road, bridges, buildings), improvements. The electronic vehicle and green energy markets will create demands for nickel and high grades of copper. As new wind energy technologies come on line the demand for aluminum will also increase with the development of lighter, and less cumbersome wind turbines grows.
Generally speaking, the manufacturing and green energy industries will be offering steady growth potential, and an increasing need for scrap of all kinds.
Download The Peel Scrap App
Just a reminder that our mobile app is available in both mobile operating systems. The app is free to download and available at both the I-Tunes and Google Play stores. It will keep you current on prices in addition to providing other useful links and information. (Search: Peel Scrap Metal Recycling).