Is it a summer slump or a deeper disruption?

The industrial sector is feeling the strain from mixed earnings and the lingering uncertainty of the upcoming U.S. presidential election. As RMU writer Stephanie Ritenbaugh, pointed out in her article on Monday, the sector has taken a significant hit. Speculators are quickly offloading stocks and looking for safer investments due to geopolitical risks and economic concerns in the U.S. and China.

So, what does this mean for the recycled metals industry?

Typically, the Industrial sector serves as one of the key economic indicators. A decline here could signal broader supply chain issues. While UBC prices have risen 10% since the start of the year, currently running around 76% MWTP, there are talks of a possible rally in Q1 2025, partly due to the new SDI facility expected to come online in December 2024. This facility is anticipated to be a heavy buyer of UBC, so market participants are said to be holding off on their annual pricing in order to see how aggressive SDI will come into the market.

Yards we’ve spoken to have indicated that they have had fewer than usual intake. They state that even though summer is typically slow, they believe that the prices aren’t providing enough incentive for people to hunt and haul loads into the yards. Although many yards view this as a temporary phase, some, particularly in the Midwest and South, express concern and are delaying their sales to the market.

On the tolling side, despite January and February typically being slower months, there are already concerns that companies involved in tolling may struggle to recover fees due to the dip in LME prices.

With the concerns from the tolling side, let’s not forget that due to the tight supply in the market, extruders had reverted to purchasing from tolls, as it is more expensive, it seemed to be a good temporary solution to the local supply shortages. It will be interesting to see where they will turn to next to source material.

Additionally, companies planning to invest in new equipment, such as sorters, have placed those purchases on hold. Even the investments in equipment for large existing projects have been delayed and/or temporarily placed on hold. This all said to be, in part, a response to the LME prices again exacerbating the situation by further complicating the coverage of spreads.

Although major market manufacturers and mills are saying that they will start to buy in August for September delivery, there are still some mills that aren’t following through and keep pushing off their buying interest.

Is this a typical summer slump or a more profound disruption? One thing is for sure, looks like no one wants to take a risk and is sitting on the sidelines until market trajectory becomes clearer in the coming months.