Steel scrap refers to steel products that have been used or no longer meet technical standards for direct use, yet still retain very high recycling value. In the context of the global steel industry’s strong transition toward green production and carbon emission reduction, steel scrap is increasingly becoming a strategic raw material, as well as an important derivative commodity traded on the London Metal Exchange (LME)..

To gain a deeper understanding of steel scrap, please follow the article below by Edu Trade.

1. Overview of Steel Scrap Traded on the London Metal Exchange (LME Steel Scrap)

Mining:

Steel scrap is typically collected from old machinery and equipment in industrial sectors, scrap from construction projects, end-of-life automobiles and motorcycles, and scrap generated from the transportation industry, among others.

Production:

After being collected from various sources, steel scrap is classified based on criteria such as chemical composition, shape, and origin. It is then cut into smaller pieces suitable for recycling. The processed scrap is cleaned to remove impurities and melted into liquid steel. Finally, the molten steel is rolled into desired forms such as billets, bars, and steel plates.

Applications:

Steel production: Steel scrap is a key raw material in steel manufacturing, accounting for a significant proportion of global steel output.

Cast iron production: Steel scrap is used in cast iron manufacturing, serving applications in machinery and equipment components.

Construction: Steel scrap is utilized to produce rebar, roofing sheets, and structural construction components.

Manufacturing of metal products: Steel scrap is used to manufacture metal products such as screws, bolts, rivets, etc.

2. Factors Affecting LME Steel Scrap Prices

Supply and Demand:

When industrial production and construction activities increase, demand for steel scrap rises accordingly, leading to higher prices. In addition, the availability of steel scrap in the market affects supply and directly impacts global steel scrap prices. As steel production expands, demand for steel scrap also increases, pushing prices higher, and vice versa.

Steel production technology:

The trend toward electric arc furnaces (EAF) increases demand for steel scrap, providing long-term support for prices.

Inventory levels and scrap supply:

• Steel scrap supply depends on consumption cycles and demolition activities.
• When inventories are low, prices tend to be more volatile.

US dollar exchange rate:

LME steel scrap is traded in USD. A stronger US dollar makes steel scrap more expensive for investors holding other currencies, thereby exerting pressure

Prices of substitute products:

LME steel scrap prices may also be influenced by prices of substitute materials such as iron ore and aluminum. When iron ore or aluminum prices rise, steel producers may shift toward cheaper raw materials, increasing demand for steel scrap and pushing prices up, and vice versa.

3. Key Strategies for Effective Investment in LME Steel Scrap

In-depth product knowledge:

Investors need to thoroughly understand the characteristics of LME steel scrap contracts and spend time researching the steel scrap market, including supply and demand dynamics, pricing, and market trends.

Alignment with hedging strategies:

If investors wish to protect steel scrap prices for their production or business activities, they may apply hedging strategies by purchasing LME steel scrap futures contracts. This approach helps protect investors from losses caused by unfavorable price fluctuations

Consult Edu Trade Experts:

• Edu Trade is a leading and reputable member of the Vietnam Mercantile Exchange (MXV), specializing in commodity investment advisory services.
• With more than 10 years of hands-on experience, Edu Trade’s experts provide timely and accurate market insights, enabling investors to identify potential opportunities and make informed investment decisions.

Edu Trade regularly organizes investment training programs to enhance commodity trading knowledge and skills for investors. Furthermore, investors can receive in-depth consultation from Edu Trade specialists to develop effective investment strategies and minimize unnecessary risks during trading activities.

We hope the above insights from Edu Trade have helped investors gain a clearer understanding of steel scrap (LME).

If you are interested in investing in this commodity or participating in the commodity derivatives market, please contact our Hotline: 0866.212.677 for professional consultation and support.

Edu Trade – Leading Member of the Vietnam Commodity Exchange (MXV)