Current Yearly Scrap Metal Outlook

Crane moving scrap metal onto pile
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Scrap metal continues to have a gloomy prognosis as we move into 2016, except for a few positives.

Downsizing and Operations Curtailment

Joining other scrap recyclers such as Alter Trading Corp. in reducing headcount, Sims Metal Management continued to set the stage for ongoing rough times by issuing a profit warning to shareholders, and announcing that it would chop 800 jobs. Sims, based in Sydney, Australia and New York, indicated that it is scaling back its operations on a global scale, with an emphasis on the U.S. Galdino Claro, Sims CEO, and Chief Financial Officer Fred Knechtel blame ferrous prices that declined 30 percent in less than two months to November as the key factor in the current struggle.

Also noteworthy, aluminum prices have dipped 10 percent while copper has declined 15 percent during the latter half of 2015.

The company forecasts "flat earnings" in 1H 2016, which corresponds to the second half of the calendar year 2016. It expects a $20 million impairment charge during FY 2016. The emphasis of its curtailment efforts will be on its North American scrap yard operations. It intends to reduce operations or idle up to 35 of its 270 global facilities. 

The impact of depressed pricing has led to mine closures as well, including Magnetation, which closed one operation earlier in 2015, and was considering a second closure as of November. According to Bill Beck, veteran industry analyst at the Scrap Price Bulletin (Nov. 23) "Producers of iron ore pellets (typically referred to as taconite) in Michigan and Minnesota have been dealing with global seaborne iron ore prices that have dropped below $40 a tonne (down $100 a tonne in little more than a year) and slackening demand from blast furnace steelmakers at the lower end of the Great Lakes." Beck adds that around1,800 Minnesota mine workers are currently laid off, amounting to one-half the region's taconite workforce.

Following Copper

In the wake of depressed demand for copper, nine large Chinese copper producers have agreed to reduce production by around 5 percent in 2016, which is more than 200,000 tonnes. The move was a response to low metal prices on the London Metal Exchange and in Shanghai which have seen prices fall to their lowest level in greater than six years.


Copper is used as an early indicator of economic activity, or that lack of it. As was noted in an article at Smarter Analyst, "Dr. Copper – the metal with a PhD in economics – is always the first to know which way the economy will go.  Copper’s broad use in industry and many different sectors of the economy, ranging from infrastructure to housing and consumer electronics, makes it a good early indicator of economic activity. "

As an effective indicator of economic activity, rising copper prices are typically followed by economic growth, and vice versa. With copper having recently plunged to its lowest levels since 2009, and all metals down, the Smarter Analyst piece offers a gloomy perspective for the months ahead.

Positive Notes for Metals

It is difficult to find many positives for 2016, based on the current market and projections. There are, however, some optimistic forecasts:

Steel to grow: The World Steel Association (worldsteel) is predicting an increase in world steel demand of 0.7 percent in 2016 versus a 1.7 percent dip in 2015, and a 0.7 percent gain in 2014. They feel that the market will stabilize in China, and that growth in India will show resilience to the trend of slowing economies globally.

In developed countries, recovery for the steel market continues, albeit more slowy. 

Zinc continues upward: The International Lead and Zinc Study Group (ILZSG) says that global demand for refined zinc metal will increase by 3.3 percent to 14.4 million tons in 2016, following a 1.1 percent to 13.90 million tonnes in 2015. Furthermore, ILZSG predicts a demand growth of 3.3% to 14.37 million tonnes in 2016, driven by automotive and construction.