Nonferrous scrap flows in the United States essentially have come to a halt as a result of the COVID-19 outbreak, the disease that results from the novel coronavirus. Some scrap yards have closed their retail scrap operations as a result of the outbreak, and industrial generation in certain sectors, including automotive and aerospace, has ceased.
“Supply is very quiet; however, so is demand,” a red metals processor based in the Northeast says. “Several yards, especially public-facing [ones], have opted to close down.”
While the consumers his company supplies want to be assured they will be able to get scrap deliveries as needed, he adds that as of mid-April, “so far demand has been pretty quiet.”
He says his company is operating with reduced staff but still can process and prepare material for customers.
Despite the current circumstances, the red metals processor says he is optimistic about the near-term future. “Demand will improve as Q2 moves along, and then the supply side will be challenging!”
A scrap broker based in the Southeast sums up the current state of affairs by saying, “Things are weird,” which is likely a sentiment many would agree with.
He also expresses concern about the position brokers may be placed in for export orders that are currently on the water to India and Pakistan.
India began a nationwide lockdown March 24 in an effort to contain the COVID-19 outbreak. It was initially only supposed to last for three weeks, but Indian Prime Minister Narendra Modi extended the measure until May 3. Many small foundries and mills have closed.
The lockdown has created significant disruption at India’s ports. The Institute of Scrap Recycling Industries (ISRI), Washington, says India’s Ministry of Shipping had ordered the country’s ports to “ensure that no penalties, demurrage, charges, fees [sic], rentals are charged” through April 14, the original date the lockdown was supposed to end. The ministry’s director general of shipping extended that order to shipping lines. As of April 16, the Ministry of Shipping had not announced that these measures would be extended.
The broker mentions the large number of blank sailings leaving Indian ports, which he says he fears will lead to a significant shortage of containers when demand returns.
“Short of being able to name your own price, mills may have to throw their established spreads and formulas out the door to secure scrap.” – a scrap processor based in the Midwest
A scrap processor based in the Midwest mentions that his company has had to furlough some employees because of the slowdown in business. His company made the decision to close its retail business 10 days before the governor for the state it operates in issued a stay-at-home order. He says 15 to 20 percent of the company’s overall business is retail, though it accounts for 30 percent of its nonferrous business.
He also points to the reduction in industrially generated tons, noting a 50 percent decrease on the nonferrous side of the business.
March had been a very busy month for his company, the source in the Midwest says, adding that the COVID-19 impacts began to emerge in April.
If mills see orders strengthen in May, “demand for scrap will outpace supply for a period of time,” he says. He’s anticipating a seller’s market, particularly for grades like aluminum cans.
“Short of being able to name your own price, mills may have to throw their established spreads and formulas out the door to secure scrap,” the Midwest-based processor says.