2018 Scrap Metal Forecast 

Heavy Investor Activity From Large Cap Companies and its impact on the scrap metal forecast

Ford Motor’s Aluminum Scrap Demand Skyrockets:

Large SUV Models Selling off Every Lot in America within 7 Days

Understanding Correlation Between U.S Dollar, Commodities, and Federal Reserve Rate

2018’s scrap metal forecast is showing signs of possible volatile times ahead, due to forecasted rising Federal Fund interest rates in the upcoming months, which directly affect the price of commodities.  U.S Dollar and Fed Fund Rates move in the same direction as each other when understanding their relationship, and commodities move in the opposite direction if you were looking at a graph of the three.  Because of the inverse relationship that the U.S Dollar/Fed Fund Rates and U.S Commodity pricing have with each other, there is the possibility that commodities will feel a slight pinch when it comes to pricing in 2018.  

When the Federal Funds Rate increases, the U.S Dollar also appreciates alongside it. The Federal Funds Rate is the interest rate in which banks charge each other when borrowing from one another. The depository institution, the Federal Reserve Bank, sets these rates that are charged on the money that they lend to other banks.  So when the Fed hikes rates on what is charged in interest on loaned money, the U.S Dollar appreciates because of the new demand for the dollar.  When rates are higher, banks do not take out as much money because of the higher interest rate they are required to pay back, thus resulting in people seeing the effects of the appreciated U.S Dollar.

Who’s Taking Advantage of Current Situation?

Although there is the chance of a dip in the commodities market, one company is getting a jump on the competition, Ford Motors.  On February 12th, 2018, Ford Motors announced that they are investing $25 million into their Louisville, Kentucky plant in order to meet new, higher demand for large SUVs.  These new, aluminum-intensively built SUVs are selling off of car dealership lots at rates faster than people have seen in years, so the supply of these vehicles needed an immediate boost that will allow Ford to meet their consumer demand.  The use of aluminum in these large vehicles serves as a great weight-reduction solution and allows these SUVs to be over 300lbs lighter than prior to using this new aluminum design. Not only this, but the aluminum used in these vehicles will most likely be generated from scrap metal, which is extremely environmentally beneficial.

Ford released a statement in the spring of 2016, saying that it recycles 20 million pounds of aluminum each month, enough to build 30,000 F-150 bodies. These positive signs show that Ford has been behind the scenes generating practical ways to use recycled materials to create better, safer products, which is a very good sign from a company if you are looking to see if it has possible future growth opportunity in a marketplace where companies that have environmentally friendly missions always find greater success.

Why Aluminum?

Not only does recycled aluminum mean that the vehicle’s price will be noticeably lower, but aluminum also can be counted on to maintain its original state once recycled time after time.  Aluminum is also known for its strength and durability, making it a number one material choice when it comes to building midsize to large SUVs, trucks, and off-road vehicles.  Found in the 2016/2017 Sustainability Report that Ford Motors published, there is a line that gives a nice snapshot on just how practical using aluminum can be, “aluminum can be reused many times without loss of quality, and recycling aluminum requires 95 percent less energy than refining raw aluminum from bauxite, as well as avoiding the environmental impacts of mining”.  These benefits that aluminum pose for building vehicles show that Ford’s using the right mindset when it comes to the future construction of vehicles; fuel-efficiency and environmental friendly recycled materials being the primary source building materials.

Who is Supplying Ford?

With Ford’s new business plan unveiled to everyone, people wondered who the supplier that can meet these large demands that Ford is asking.  Arconic, a manufacturing company based in Pittsburgh, PA took on the job of being the aluminum supplier of Ford for this new demand that they are experiencing.  Arconic specializes in light-weight, metal engineering and manufacturing, and has a market capitalization of 11.97B.  Their 2018 forecasted projections show likely growth due to the new manufacturing contract with Ford.  Ford is most likely to also show growth in 2018 because of its high-sales volume of SUVs currently being moved off of dealer lots. Ford’s steady crawl out of the long term declining share price that they have been struggling with over the years, has the possibility to snap its streak of losing because of this business model upgrade.

Ford’s Vision into The Future

The 2018 forecast for metal (specifically aluminum) as a commodity, is going to have some hurdles to jump, like the new tariffs imposed on certain imports coming into the U.S.  Although there could be some hard times, the signs of positive earnings that aluminum as a commodity could bring, will in return give good gains to companies and regular people looking to find profit from the success of commodities.  Ford’s proactive steps in creating safe and sturdy products, designed and made for and by recycled aluminum, show that there will be many other competitors in the market that are going to follow in Ford’s footsteps in implementing aluminum design in their construction of vehicles.

What You Should Look For:

These upcoming months, we will have to keep a keen eye on the Federal Funds Rate because it will give us an understanding on what the future months for the U.S Dollar and metals as a commodity will have.  When Fed Fund rates are high, commodities typically drop in price because people would rather have liquid cash at their disposal, instead of being tied up in commodities. Understanding that when Fed rates rise, commodities typically drop, is a key concept to understand in order to predict future trends in the scrap metal market place.  The hopeful sign that Ford is turning up their use of aluminum scrap shows promise that this industry will soon have great demand across all marketplaces.

With projections showing that metal commodities could possibly take a dip in the next year, now has never been a better time to get rid of that junk car you’ve been meaning to take care of.  When you recycle your vehicle, over 90% of the vehicle’s aluminum is scrapped and repurposed. Not only are you getting rid of your old vehicle for the highest dollar amount offered by the scrap market, but you are contributing to protecting the environment by recycling your vehicle.  Along with this, you will know that your recycled vehicle will be used in the creation of a new and innovative product. With You Call We Haul, selling your junk car has never been easier, so click the link below and follow the easy instructions.

For more information about the scrap metal industry and forcasts about the industry please read our sister blog at www.arscars.com and follow our monthy Markets and Metals. Read the lastest one here.