Metal Industry Perspective 3rd Quarter 2015

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Continued Weakness in the Scrap Metal Sector

  • As seen in the graph, market values for scrap metal have declined over 50% during the last 12 months with a recent sharp drop in October;
  • Many shipping containers leaving the U.S. are now leaving empty, U.S. exports of scrap materials were down 36% as of June from their peak of $32.6 billion in 2011 due primarily to weakened demand in China for these raw inputs;
  • Steelmakers have all the scrap they need right now for the month of October and as a result prices dropped on average of $50 a ton; this is compounded by a strong supply of domestic industrial scrap from a strong automotive and component sector;
  • In some regions scrap yards are no longer paying for certain types of scrap such as appliances and only providing disposal services for the material;
  • It is expected that China's gross steel production will exceed domestic consumption by approximately 440 million tons in 2015 which is about 4 times the annual steel production in all of the U.S.;
  • The market for scrap processing equipment is currently at record lows.

Hilco recommends that our clients increase the frequency of their appraisal reviews as this industry continues to suffer.