Are rising steel prices a good sign for the UK scrap metals market?

In recent months, the price of stainless steel has recovered and indeed risen. Even though it makes up only a small fraction of the overall steel market (around 45.6m tonnes in 2016), it is important because of its use in a range of products such as medical devices, cars, household appliances and environmental management technologies.

According to a recent article in the Financial Times, the rise in stainless steel prices has been driven by various factors including: increased consumption in emerging economies, with aspirations of higher living standards, consolidation in the steel industry (e.g. the purchase of Inoxum by Outokumpu), cuts in output capacity (in part due to closure of some factories), trade policies (e.g. EU and US anti-dumping tariffs on Chinese imports), and rising prices for nickel, zinc and chromium (which are key alloys that provide corrosion resistance). The rises have led to increased share prices and higher profits for steel makers such as Outokumpu and Aperam.

There have been similar rises in the 6-month prices for other base metals such as aluminium, copper and lead, as demonstrated in the figures below:

6 Month Aluminum Prices - Aluminum Price Chart

6 Month Copper Prices - Copper Price Chart

As for the base metals, scrap metal prices have also risen sharply in the last 6 months.

Source: letsrecycle.com

Similarly also, prices are impacted by various factors including the grade of the metals (i.e. grade 1 – high purity, with no alloys, and grade 2 – high purity, but with a small percentage of alloys) and the size/quality of the sheets, castings or solids. Ferrous items (e.g. scrap steel, cast iron, heavy iron, and stainless steel), can often fetch a lower price than non-ferrous metals (e.g. brass, copper, aluminium). Indeed, good quality scrap copper and especially precious metals can command £000s/tonne, as shown below:

Source: scrapsales.co.uk

Therefore the answer to the question of whether rises in the prices for base stainless steel is a good sign for the scrap metals’ commodity market, is, yes. However, as also outlined, markets for both the base and scrap markets remain volatile and subject to a number of factors. Of course, added to the challenges listed earlier, has to be the impacts of impending Brexit.

In order to maintain growth, it is therefore vitally important to put in place ‘pull factors’ to facilitate greater stablity in the scrap metals’ market, including the lowering or zero rating on secondary raw materials, and implementation of extended producer responsibility.

 

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