A great rebound

Columns - Editor’s Letter

Rising scrap metals prices could be one sign that the global economy is improving since the onset of the pandemic.

January 30, 2021

Metals prices have rebounded strongly since the lows seen early in the pandemic, with the prompt industrial composite ferrous scrap price flirting with the $500 per ton level in January, according to Management Science Associates’ Raw Material Data Aggregation Service. Pricing for this grade reached a low of $277 per ton in August of last year and has been on an upward trajectory since.

This could be one sign of the “great rebound” in the global economy that PricewaterhouseCoopers (PwC) is predicting for 2021. The firm says it expects the global economy to expand by approximately 5 percent in market exchange rates, which would be the fastest rate recorded in the 21st century. However, much of that growth will be seen in the second half of the year, according to the firm, and depends on the successful deployment of effective COVID-19 vaccines and continued accommodative fiscal, financial and monetary conditions.

PwC says that by the end of 2021 or early 2022, the global economy should have rebounded, albeit unevenly, to its prepandemic level of output. The Chinese economy will be at one end of the spectrum, according to the firm, and already is bigger than it was before the pandemic. Advanced economies that are either service-based or more focused on exporting capital goods are likely to be on the other end of the spectrum, according to PwC’s analysis.

“This recovery will be fueled in part by the development of green infrastructure in the U.S., the European Union and China.”

This recovery will be fueled in part by the development of green infrastructure in the U.S., the European Union and China. In particular, China’s 14th Five-Year Plan will include a focus on increasing energy efficiency, PwC says. This focus on green infrastructure and energy efficiency in China could spell good news for ferrous scrap suppliers abroad as electric arc furnace steelmaking is gaining market share in China and showing signs of improved profitability, according to an analysis by Shanghai Metals Market, and will require imported scrap.

In the U.S., industry trade associations have called on Congress to increase infrastructure spending. U.S. Chamber of Commerce CEO Tom Donohue says, “The long-overdue and broadly supported work of rebuilding our infrastructure” could “stimulate the economy in a major way.”

Donohue is calling for lawmakers to “enact a fiscally and environmentally responsible infrastructure package that focuses on urgent needs like roads and bridges, modernizes our critical networks and upgrades and expands technology like broadband.”

If Congress takes action in this area, the basic materials sector and the recyclers who supply it likely will see healthier financial statements as well.