Scrap Dealers: Time to Panic, or Time to Wait?

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Commodities, Supply & Demand

The recent recessionary squeeze, arms tightly wrapped around scrap metal dealers, isn’t pulling back anytime soon. As demand and prices fall in most metals markets, scrap dealers find themselves drawn in different directions, unsure about the next step. To sell, or not to sell? That’s the unfortunate question. We’ve already discussed the trader’s dilemma, but there’s no simple answer for these issues.

A metals surplus, combined with a dwindling metals appetite from China and other countries, has hurt the once-booming scrap industry. “In the last six weeks, scrap steel prices have fallen nearly 60% to about $400 a ton,” the Wall Street Journal reports. “Prices for aluminum scrap dropped 33%, copper 25% and nickel about 15%.” The article includes a quote from Peter Marcus, metals analyst for World Steel Dynamics, and his words should worry scrap dealers even more. “We aren’t near the bottom yet,” he says.

Not too long ago, this recessionary squeeze seemed nearly impossible. Large steelmakers like Nucor Corp. and Steel Dynamics Inc. were paying dealers top dollar for their scrap metals, and thieves stole aluminum, copper, nickel, platinum and steel items on a daily basis, hoping for a quick buck. Several thieves, in fact, cashed in on the commodities boom before scrap dealers, who now host an excess amount of scrap metal.

Several of these dealers have gone out of business, while others are trying to decide if they should hoard their “wealth,” or sell it now, getting out while they still can. Those willing to take the hit, though, might discover that “people are not buying,” Global Scrap & Dismantling’s David Davis tells the WSJ, as he describes the Houston-based company’s turn for the worse. A few months ago, his company was “beefing up inventory to hedge against expected price increases.” Now, readers learn, “that scrap steel is sitting in his warehouses.”

As prices tumble, will that steel stay in the warehouses? Or should dealers and companies try to sell scrap metal for even less, wary of harder falls in the future? What’s best, we wonder, for the scrap metal industry?

–Amy Edwards

Comment (1)

  1. As a scrap metal dealer I’d say you’re dead on.

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