A deep-rooted structural change in US scrap mart threatens to pinch supplies

Feb 01, 2010 | 04:15 AM | Michael Marley

The words "supply driven" or "supply constrained" seem to be popping up more often in conversations with scrap processors and brokers. Some might argue that it's just a short-term situation that occurs infrequently. Winter weather can assume the blame—peddlers and small dealers take a break when snow starts falling, while the larger yards are reluctant to operate much of their heavy machinery because equipment breaks down more often in the cold and the snow makes repairing it that much more difficult.

The cold weather normally has little impact on industrial scrap generation. Plants still make vehicles and appliances regardless of the outside temperature. The only critical problem is transportation. Picking up roll-off containers or scheduling a railcar loading can be a problem. Snow slows all traffic, and gondola cars or truckloads of No. 1 bundles and No. 1 busheling may not arrive as soon as anticipated.

For those mills operating with a minimal amount of scrap on the ground or just-in-time inventory management of raw materials, winter sometimes means a shipment of scrap arriving a few days late—not simply a few hours late.

This notion that supply, or lack of it, is driving the scrap market and setting the price may have longer-term implications for steelmakers and foundries. Some dealers and brokers believe that supplies of obsolete scrap aren't shortened just by winter weather. There is, as some would say, a structural change to the market.....