Many UK merchants enjoyed a good level of trading activity during the first five months of 2022. However, and as noted in my previous report, the market endured a period of prolonged stagnation before finally capitulating into something more significant. After a long stand-off between suppliers and steel mills, prices fell seemingly on an almost daily basis, with some of the largest of those falls seen during this past month as mills cited poor demand for their finished products.
The decline was as significant as the rise had been earlier in the year, falling by over US$ 300 per tonne to beyond the low levels seen in late 2020. As is the norm in such circumstances, the market rebounded to some extent and regained around US$ 100 of what had been lost. In recent days, however, the market is seeing a further downward correction as prices slip back slightly on recent global futures sentiment emanating mainly from China and the USA. During this unsettled period, the UK has seen a resurgence in container activity as markets other than Turkey were able to re-enter on improved terms, thus providing alternative destinations.
The downside of such quick and hefty price reductions has been a slowing of material into many UK recycling facilities. When this is coupled with high UK inflation (currently 9.1% and projected to reach 11% by the end of 2022 - the fastest rate seen in 40 years), an increase in energy costs and taxation as well as a shortage of skilled workers (many of whom are going on strike as the increase in UK living costs bites), the latter part of the second quarter and the beginning of the third quarter have proved more challenging for merchants.
With the difficult situation in the Ukraine still prevailing, COVID worries, latest recessionary indicators and political instability around the globe, it is unclear which direction markets will take. Dare we hope that we have already experienced the market bottom? With so many market influences, it is difficult to predict the future direction with any real certainty; in other words, reactive rather than predictive markets prevail.