The prices for metals of all kinds have been on a steady decline for the past couple of years, and at the end of 2015, the prices of commonly-recycled scrap metals like aluminum, steel, copper, and tin has decreased significantly since the beginning of the year. Some analysts are suggesting that the precipitous drop in prices may flatten out as we enter 2016, but you shouldn't look for any sudden turnarounds in what you'll get at the scrap yard for your old pieces of metal. There are two primary factors that will affect the price for scrap metal for the 1st quarter of 2016.
Lower Demand in China for Scrap Metal
China has been on an economic growth spurt unlike any the country has ever seen in modern times. The rapid growth of cities, factories, cars, and homes over the past couple of decades has taken a turn for the worse recently, and that has caused a corresponding drop in demand for scrap metal used to build their new infrastructures and products for businesses and consumers.
To understand the drop in demand, consider how much ferrous (iron-based) scrap metals China has been importing over the past six years. In 2009, the U.S. exported 5.5 million tons of ferrous scrap to China, but through 2014, the U.S. only exported about 200,000 tons. The demand for scrap metal has decreased even more during the first three quarters of 2015.
The demand in China for scrap metal is expected to remain flat for the next few years
U.S. Economy Continues its Recovery
The hope on the horizon is that the U.S. economy continues its recovery, and the demand for metals and scrap metals can return to its pre-2008 levels.
Manufacturing capacity levels in U.S. factories have gone from a low of 63.9% in 2009 to 76.2% at the end of November, 2015. Manufacturing capacity levels are how much a factory can produce during a manufacturing cycle versus the amount of goods that were actually produced. The higher the manufacturing capacity level the more productive the factory is, and by extension, how healthy the manufacturing industry and economy as a whole is performing.
Manufacturing levels increased 1.4% overall from November, 2014 to the end of November, 2015.
The rate hike of 0.25% by the Federal Reserve on December 16, 2015, signals the U.S. economy is still growing, and that there is renewed confidence that the growth will be long-term. The expansion of the U.S. economy will help offset the decline in demand of scrap metals in China.
The bottom line is that the prices of scrap metals aren't expected to drop much further, if at all, and will remain stable at least through the first quarter of 2016 as the Chinese and U.S. economies transition into different growth phases.
For more information, contact Summit Recycling of Penn Hills or a similar company.