US scrap trade gets slow start in April, scrap in short supply

Monday, 06 April 2020 22:00:31 (GMT+3)   |   San Diego
       

Domestic scrap trade, which has a historical precedent of being robust during the first days of each month, has kicked off slow for the month of April.

“We don’t have anything solid at the moment,” a source said. “We don’t think we’ll have solid ‘where the market is’ numbers for another couple of days.”

A possible bright spot, another source added, is that the market may not “fall off the side of the cliff, like we thought it would last week.”

“Last week there were a lot of people who thought that the market could fall by as much as $70-$80/gt ($71-$81/gt) in April, but at this point, it’s speculated that busheling may only come down between $20-$30/gt ($20-$30/mt) because it’s in short supply, and that other grades may trade down at $50/gt ($51/mt). But we probably won’t have a solid peg on where the market is until Wednesday or Thursday.”

Another source indicated his belief that market prices will be largely regional.

“We know of one mill that bought some scrap a couple of weeks ago at down $20/gt ($20/mt), but another mill won’t be buying because they have scrap on the ground,” he said. “The market is not at all normal this month. The volumes are going to be way down.”

Sources also spoke of what appears to be a growing scrap supply shortage, which is being driven by widespread scrap yard closures due to concerns over the spread of COVID-19. That shortage, sources said, may help overcome lagging demand.

For example, the SIMS Metal Management scrap metal recycling yard retail business in the Bronx, New York, has temporarily shuttered. According to a special notice posted on their website “As a result of the Coronavirus emergency, Sims Metal Management has temporarily shut down our ‘Retail Business’ and we are not open to the public. If you are an industrial/commercial business, please contact our facility and a Buyer will arrange for you to get an appointment with our receiving department.”

On Friday, it was reported that Schnitzer Steel announced it would temporarily suspend operations at its export dock in Providence, Rhode Island, in addition to halting operations at three other Northeast ferrous and nonferrous scrap yards.

Some smaller, independent scrap yards have also moved to suspend operations temporarily due to the COVID-19 outbreak.

“The idea is that it’s better to protect employees and follow safety guidelines and return to work later in April when there’s more clarity about the state of the coronavirus outbreak. Plus, by shutting down operations, [the smaller yards] may be eligible for payroll and other operational grants that are being offered by the government,” a source said, commenting on the Paycheck Protection Program (PPP) that was created under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) in late-March.

The PPP is being managed by the US Small Business Administration and is primarily available to small business and certain other organizations with fewer than 500 employees. According to their website, “The SBA will forgive all loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. At least 75% of the forgiven amount must have been used for payroll.”

Banks began accepting loan applications last Friday.

The question as to how quickly scrap yards applying for the PPP will get relief has yet to be answered. There is also concern that the $350 billion funding program could run out of money. As of Saturday, one day after the program went live, Bank of America had already received more than $22 billion in loan requests; Wells Fargo had received $10 billion.

"Whether the PPP will be a success or not will largely be determined by how well the program is administered at both the local and federal levels,” said Ascent Consultants founder Matt Beckmann.  “There are still many unknowns about the program, and early data shows huge application numbers.  With limited resources to review and process all of those applications, the real tragedy will be if this turns into another Section 232 Exemption fiasco, where applications far exceed capacity and businesses are unable to tap this lifeline."

 


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