The Week in Review- Metals face a critical juncture

Turkey is actively securing billet purchases at prices below $480/mt CFR, while the sentiment in the ferrous market for September has become increasingly pessimistic.

Meanwhile a leading Chinese steel maker, the China Baowu Steel Group Corp., said there’s trouble ahead for the steel industry. That’s as reported by Bloomberg News, which added that China’s protracted property downturn continues, and factory activity remains sluggish. Bloomberg notes that the warning from Baowu, which produces about 7% of the world’s steel, underscores the risks to commodities demand and prices, at a time when the U.S. is trying to stem the tide of exports from China.

Additionally, the export prices for steel have fallen below $370/mt CFR, driven by European steel.

These collectively all indicate significant pressure on the global steel and recycled metals market, underscoring the need for strategic adjustments.

Nonferrous highlights

The U.S. Midwest Premium is back under 19 ¢/lb this week after falling again on Friday. Down another 25 points to 18.65c. A falling MWP typically indicates low demand in base metals, leading to low recycling supply. This would drag down scrap prices. That makes it easier to buy, if you could locate metal in this short-supply market. It also typically means that recyclers then look to export. Nonetheless, as one of the largest metal producers proclaimed last week, this avenue may also be reaching a dead-end turn. He may just be correct, as we are already seeing slow demand in export.

RMU’s Gabriella Vagnini reported Nissan, Honda, and Mitsubishi are trying to reshape the future of their automotive manufacturing by exploring ways to incorporate recycled metals into their products. The goal is to reach carbon neutrality and surpass China’s advancements in this field. This new collaboration should provide a better, positive outlook in the auto industry and reflectively, the recycled community. RMU will keep you updated on their progress.

Another good sign for aluminum demand can be found in a new study by Ducker Carlisle that states that aluminum use in the building and construction market will likely increase around 9% by 2027 over 2022 volumes.

Driving that increase is the growing use of the material in commercial buildings, as well as in clean energy applications. Federal infrastructure spending, including emissions reductions programs supported by the Inflation Reduction Act, these indications should also increase aluminum’s use in building.

The forecasted growth is in accordance with RMU’s report that the construction sector is poised to grow this year, boosting demand for both ferrous and non-ferrous scrap.

Economic highlights

The U.S. caught some economic wins this week. Economic indicators released last week showed signs of easing inflation, which play into the decision by the Federal Reserve to lower interest rates at its September meeting. Such a move would reduce the cost of money for businesses, including the scrap industry, and help companies expand. Lower rates also would impact commodity and equity markets, as well as the value of the U.S. dollar, which could boost demand for recycled materials as companies produce more materials comprised of scrap. Below is a snapshot.

• The Producer Price Index, rose 0.1% month over month, below the 0.2% that was forecasted in July.

• The Consumer Price Index, increased just 0.2% in July. That puts the 12-month inflation rate at 2.9%, the lowest since March 2021.

• Unemployment claims dropped by 7,000 during the week ending August 10. Initial claims clocked in at a seasonally adjusted 227,000, federal data showed. Meanwhile, the 4-week moving average was 236,500, a decrease of 4,500 from the previous week.

• Retail sales jumped 1.0% to $709.7 billion in July. That’s a 2.7% increase over the previous year. Showing that consumers are still spending.

As we did see some upticks in last week’s economics, especially when US retail sales numbers came out, it still leaves the recycling community wanting more. All eyes are now on Fed Chair Jerome Powell as he’s due to speak at Jackson Hole on Wednesday. His address is anticipated to provide more clarity on interest rates in the hopes they will go down which will ease financing for recyclers and ultimately bring back demand.

What to watch for in this week’s economic reports