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State of the Scrap Industry – Part 2: The Balancing Act of a Global Economy

August 15th, 2013 by

In this blog post we’re continuing our look at the overall scrap industry. In Part 1, we looked at the current discrepancy between supply and demand, and the drop in prices that has taken place as a result. In this post, we’re taking a look at the importance of maintaining a global perspective.

To combat an overabundance of stockpiled metals takes significant increases in construction and manufacturing. Domestically, things are looking up. Consumers are buying cars again here in the U.S., and residential construction has been picking up steam. And while all of this is great news here at home, it doesn’t have the effect on metal prices that we sometimes think it will.

As we discussed in Part 1, metal resources are spread out across the globe, and the combined total volume of these resources plays a large role in setting metal prices. The other determinant of those prices is global demand. So while increased car production in the U.S. means increased metal demand, that jump in production has to be weighed against incredibly low auto sales in Europe. Likewise, while U.S. residential construction is picking up, China is trying to tame housing construction in efforts to avoid a housing bubble.

Commodities trading is a global balancing act. Right now, the scales are tipped in the wrong direction due to a variety of factors. For example, the current political and economic scene in Europe is not a happy one. While some countries have found firm footing, most are in a state of unrest or upheaval, all of which puts a drag on the global economy. For metal prices to pick back up, gains in one country can’t be offset and overpowered by losses in another.

For scrappers, it’s still about getting the best price for that scrap. The only difference is going about it with the knowledge that prices have fallen. At the end of the day, while scrap prices are and will remain low for the foreseeable future, the scrap industry is still here. And Kurtz Metals will be here.