Scrap Steel Prices Fall by Most in Years as Market Awaits Outcome of U.S.-China Trade Talks
The scrap metal market report for February 2019 shows the most significant decline in scrap steel prices in well over a year. In recent posts, we have alluded to the market showing declines due to world trade talks stalling, tariffs and rising interest rates. While prices declined across the whole country, some areas suffered more significant decreases – more on this when we highlight the “Zone Map.”
Compared to the January scrap metal market report, the price of scrap steel decreased by over 7%. This marks a market decline in 6 of the last 7 months. The almost $14 drop in value of crushed auto bodies is the largest decline recorded in the index since the 4th quarter of 2016. Compared to a year ago, the crushed auto body index is lower by over 9%. This is also the first year over year decrease since September of 2017. At just under $179/ton the scrap steel market has returned to close to the same value of that time.
Decreases were seen nationwide but the largest drop in scrap prices came in Zone 3 (southwest) and Zone 4 (northeast). Over the last 12 months the southwest U.S. had one of the higher price per ton averages compared to the rest of the country. Scrap in the region fell almost 14% to start 2019, dropping it well below the national average.
The northeast, which has been handcuffed by a lack of exports to Turkey, suffered a 9.5% drop in scrap steel prices. Despite this the average price per ton in the region remains slightly above the national average.
U.S. & China Approaching May 1st Trade Talks Deadline – Talks Progressing and Extension for Negotiations Being Considered.
Over the weekend both the United States and China made statements related to the positive movement in the trade talks between the two countries as the March 1st deadline approaches. This key is of course the deadline to reach a trade deal or the threat to double tariffs on $200 billion in Chinese imports will go into effect. While statements from both sides were positive overall, the content coming out of each side did not entirely match up.
With talks resuming this week it is also under consideration to approve a 60 day extension to the tariff truce. Investors from both countries were happy to see the trade war wasn’t escalating after the recent talks came to a conclusion. U.S. equities climbed on Friday and Chinese steel futures also rose in early trade today.
While talks continue there are many companies and industry groups speaking out in support for the tariffs to be lifted. There have been over 44,000 requests seeking exclusion from the tariff list claiming they are hurting their bottom line. Specifically companies using steel for manufacturing are worried about having to cut jobs in order to make up for the higher costs of production.
As the scrap steel market has been hurting recently in part because of the tariffs and longtime tension surrounding trade talks, the outcome of these talks with be extremely important for the value of scrap steel and other important commodities.