Manufacturing in the United States experienced an unexpected surge at the end of 2020, leading to increased demand for industrial materials after the slowdown from the coronavirus pandemic last year. 

Subsequently, prices for industrial commodities used in manufacturing, such as steel and copper, have risen to their highest level in years. Higher metal prices and corresponding scrap flows which improved late in the year have continued into 2021. The steel industry, including steel scrap, is reaping the benefits of this increased demand and higher prices. 

During 2020, demand for industrial materials slowed down when manufacturing literally came to a halt because of COVID-19.  Economic uncertainty and lockdowns slowed down consumer spending.  With the economy opening up again, US consumers are now purchasing more steel products, like automobiles and appliances, as well as other durable goods.  These personal consumption expenditures are possible since consumers have had to forgo spending on travel, dining out and in-person entertainment.  According to the Bureau of Economic Analysis, consumer spending increased 2.5 percent in the fourth quarter of 2020.

This follows a significant increase that occurred in the third quarter after the economy reopened after pandemic lockdowns. 

Starting in the fall of 2020, recovery in the automotive and construction industries accelerated.  Those two industries together make up a significant part of the steel market in the United States.  According to Industry Week, General Motors, Ford and Toyota all reported strong sales at the end of 2020, revealing rapid automotive recovery.  Additionally, increased sales of electric vehicles spurs copper demand as copper is used in a variety of electronic components. 

A survey of manufacturers summarized in Machine Design last fall explored the increase in manufacturing, spurred on by consumer spending, among different industry sectors:  “Demand and consumption continued to drive expansion growth…Among the six biggest manufacturing industries, Food, Beverage and Tobacco Products remains the best –performing sector, with Chemical Products; Computer and Electronic Products; and Fabricated Metal Products growing strongly.  Transportation Equipment also expanded…”

According to other industry reports, the increased demand for industrial materials is causing supply chain disruptions, particularly in the steel supply chain, as orders increase and manufacturers wait for needed materials.

Materials suppliers slowed down production during the pandemic, but now are having to ramp up production again for this domestic demand and even increased global demand.  According to The Wall Street Journal, the domestic price for prime steel scrap has risen 60 percent since November, aided by the increased overseas demand.  The Wall Street Journal article quoted scrap metal recyclers who stated that they could sell everything they have, as steel mills that were not busy are suddenly doing large orders.  For the first time in years, they are even accepting shipments of scrap metal on Saturdays.  Recycling Today reported last month that the industrial composite ferrous scrap price was approaching the $500 per ton level in January.   This is up from a low of $277 per ton in August of 2020.  

Outlook for 2021

Given this manufacturing rebound, what is the outlook for metal in 2021?   According to S&P Global, a market intelligence firm providing industry data and research, a key assumption for 2021 is that “prices are rebounding sharply from pandemic-induced lows, as producers quickly cut output while demand only paused…”  In their report Industry Top Trends 2021, Metal and Mining, they state:

                “With the regions of the world at different stages of recovery, the pandemic’s impact on the commodity markets will vary…. Although the world is still emerging form the pandemic and far from resuming full-blown industrial production, we see a vastly improving outlook for most metals going into 2021.”

Recycling International last month reported that scrap recyclers still face a range of challenges bouncing back from the pandemic including hiring and training employees, transportation and logistical bottlenecks and potentially higher regulatory costs and trade restrictions.  This may be so, but material demand is expected to remain strong.  According to the Worldsteel Association, a group of steel producers that accounts for about 85 percent of the global steel output, a 4.1 percent rebound in steel demand is anticipated for 2021.

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