The question of prices always comes up and if oil goes up, will scrap metal prices go up too? Or if scrap prices go up, does that mean oil prices will go up? Great questions to ask, but not always easy to answer. Maybe 10-15 years ago it would have been easier to answer as the markets went hand in hand. This is not the case today.
What is the relationship between scrap and oil prices?
The scrap price doesn’t always affect what’s going on in the oil market, but it certainly can’t hurt. You should consider that any shipping, preparation of both new and used materials, and anything else with moving scrap will be affected.
When you hear about oil companies and projects being put on hold due to falling oil prices… that means they’ll need less metal for new projects, and that’s part of how scrap prices are affected. Rising oil prices will not always help the scrap market, in fact the two have not always been correlated in recent years. Just because one price goes up or down doesn’t mean another will follow, and you’ve even seen a seesaw effect in the past few years.
Which commodity prices will change?
Rising oil prices often cause metal prices to rise, but not all. Gold prices often rise when prices for other commodities fall because gold has traditionally been viewed as a stable metal and can help provide some stability to the markets.
Regardless of whether scrap prices go up or down, it’s important to see the prices of other commodities at the same time. For example, if scrap prices are going up, you will occasionally see oil prices go up, but that also means food products will go up. With the increase in oil prices, everything that requires transportation will also increase.
If scrap prices or oil prices are falling or there is uncertainty in the economy, investors will usually invest in fixed commodities such as gold, and gold prices will rise. Be sure to follow the iScrap App Weekly Reports on scrap prices and where the market is heading.