Don’t Expect a Surge of Scrap from the Storms

Written by Tim Triplett

Hurricanes Harvey and Irma were devastating for the many Americans still struggling to recover from the damage. But for the scrap metal market, contrary to common belief, the storms will be a mere blip.

“Everyone’s immediate reaction to Harvey is, ‘Oh, there will be so much scrap coming out of Houston, prices will drop.’ The reality, however, is quite different,” said Nathan Fruchter, CEO of Idoru Trading Co., a scrap trader and recycling consultant.

Any effect from the hurricanes will be delayed. It will take a month or two before scrap from the storm cleanup begins heading to the scrap yards, after the insurance companies have had a chance to assess the damage and basic infrastructure and services have been restored, he said.

When scrap from the storms does start flowing, it will be mostly household waste, white goods such as damaged appliances and some building materials like roofing and siding, which must go straight to the shredders. It won’t produce the higher quality HMS and P&S grades valued by the mills, he said.

In fact, in the short term, Hurricane Harvey may create a shortage of ferrous scrap, Fruchter said. If many of the Texas area recycling facilities are unable to ship their contracted tonnages to Mexico until the infrastructure is back to normal, the Mexican mills may look for replacement tonnage along the East Coast, eating into exports usually bound for Turkey.

“The scrap generated by Harvey is peanuts compared to the steel that will be needed to rebuild, Fruchter said.

Though the storms were a big disaster, their cleanup will have a small effect on the scrap market, agrees scrap consultant John Harris, CEO of Aaristic Services, Inc. He expects a heavy flow of light, low-density shredded material for a couple months before it peters out and the market returns to its normal course.

Thousands of cars and trucks were destroyed by wind or water. It will take months for processors to strip out the usable parts before sending the shell of the vehicles to the shredder. Shredded automotive scrap tends to have a high copper content that makes it unsuitable for remelting into certain grades.

Harris is among a consensus group of scrap experts who expect the price of scrap to decline by at least $20 per gross ton in October. Not because the storms have created an oversupply, but because demand for U.S. exports has declined in Turkey, and U.S automakers have curtailed some production. (See related story, SMU Sources: Ferrous Scrap Prices Softening.)

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