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Exclusive Forecast: How market movements and geopolitics impact the recycled metals industry

Written by Edward Meir


Edward Meir of Commodity Research Group provides a monthly market commentary for Marex. The following is a summarized version of his commentary, tailored to the interests of the recycled metals industry.

Monthly Commodities Outlook: June and Early July Review

Highlights for June & 1st Week of July
Commodity markets experienced a rally during the first three weeks of June. Although the index saw a sharp decline in the last week of June, it rebounded strongly going into July, driven by falling U.S. interest rates and a drop in the dollar.

Energy Markets
Oil prices climbed higher in June and continued their advance into July, driven by expectations of stronger summer fuel demand. Additional support came from Russian and Canadian oil producers reducing crude units in the market. Diesel and gasoline saw sharp gains in June, but natural gas prices declined.

Base and Precious Metals
Base metals saw moderate-to-significant declines in June, but this past week has seen a decent bounce as fund activity increased. Precious metals, except for palladium, worked lower in June but rallied in the first week of July as the dollar sell-off intensified.

US Equity and Treasury Markets
U.S. equity markets hit record highs throughout June and into July. Ten-year treasury yields finished June almost unchanged, spiked in early July, and then ended the week sharply lower after the June non-farm payroll report.

Impact on The Recycled Metals Industry

Aluminum and Base Metals
The steady prices and the recent rally in base metals indicate a balanced demand-and-supply scenario. The increased fund activity suggests a more dynamic market, potentially leading to higher demand for recycled metals as manufacturers ramp up production to take advantage of favorable conditions.

Oil and Energy
The rise in oil prices due to increased summer demand and supply reductions from Russia and Canada highlights the importance of energy costs in metals recycling, especially as it pertains to copper prices. Higher energy prices can increase the cost of recycling operations, affecting profitability.

Precious Metals
The volatility in precious metals, driven by changes in the dollar and interest rates, impacts the scrap market by influencing the prices of metals like platinum and palladium, which are critical in automotive and electronic recycling.

Global Trade Developments
The imposition of EU provisional tariffs on Chinese electric vehicles and India’s anti-dumping duties on Chinese solar panel frames could disrupt global aluminum demand, affecting scrap supply chains. These trade policies are crucial for recycled metals traders to monitor as they navigate potential supply constraints and shifts in demand.

Broader Market Context

Geopolitical Influences
The French and UK elections have created significant market movements, affecting investor sentiment. In the U.S., the political landscape is adding volatility to the markets. Ongoing debates and potential policy changes, particularly regarding green initiatives and trade tariffs, could reshape the demand for various metals, influencing scrap prices.

US Economic Indicators
The New York Fed’s survey showing decreased inflation expectations could encourage the Fed to cut rates in September. Such monetary policy changes can impact metal prices by affecting the dollar’s value and borrowing costs, influencing the recycled metals industry’s financial planning.

Outlook for July

Base Metals
The outlook for base metals remains cautiously optimistic, with expectations of increased buying activity ahead of China’s Third Plenum session. However, the ongoing mine tightness and depressed treatment charges (TC/RC) suggest continued support for metal prices. The recycled metals industry should prepare for potential supply chain disruptions and monitor policy announcements from Beijing closely.

Precious Metals
Given the recent volatility, the recycled metals industry should stay alert to fluctuations in precious metal prices, driven by changes in monetary policy and geopolitical developments. The potential for increased volatility presents both risks and opportunities for scrap metal traders.

Conclusion
The commodity markets are showing signs of recovery and volatility, with significant implications for the recycled metals industry. Monitoring global trade policies, geopolitical developments and economic indicators will be crucial for navigating the market in the coming months.

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