Hurricanes Deliver Shock to Scrap-Metal Market

Sorting through the wreckage.

Photographer: Sean Rayford/Getty Images

After this year's string of ferocious hurricanes and an 8.2 magnitude earthquake in southern Mexico, the markets assume that the destruction will produce an abundance of scrap metal that it is ready for collection and recycling. These markets hope the result will be falling prices in expectation of an oversupply.

The reality is quite different. There won’t be an excess of ferrous scrap. Instead, demand for scrap metal, rebar and steel products will far outstrip supply. And to make matters worse, the industry was largely unhedged despite having the tools available to do so — not just insurance, but futures contracts.

Although the consequences were devastating, the remains of all of these storms predominantly consisted of water-saturated homes, destroyed white and light goods, unusable furniture and mass quantities of garbage. The earthquake in Mexico, meanwhile, took place in the south, in regions much less developed than the north and Mexico City.