All this thanks to a cheap dollar and containerization

Jul 01, 2009 | 06:34 AM |

Domestic steelmakers need to realize that the scrap export market is here to stay and that offshore steel mills in distant lands like Turkey, China and Vietnam are everyday players in the international ferrous scrap game.

The words aren't mine. They belong to a veteran scrap trader on a mission to wake-up the American scrap industry to an irrefutable new reality.

Of course, it wasn't always that way.

The weakness of the U.S. dollar vs. other major currencies is a major driver, but other forces also have been at work, producing what economists like to call structural (or long-term) changes to the market.

In the past, No. 1 heavy melt and shredded scrap were the main feedstock for rebar mills and other electric furnace operators. Integrated mills preferred the denser, higher-quality material like factory bundles as long as the price was attractive or if they needed to boost production slightly.

What the mills didn't want was then piled up in dealers' yards or was sold to export yards, often at a discount to U.S. market prices.

Exporters used to think that if they shipped 10 million tonnes it was a good year. A decade ago, they ran into new competition and barely squeaked out 6 million tonnes to overseas buyers. The new competition was a host of freewheeling eastern European scrap traders. Following the breakdown of the Soviet Union in the 1990s, the Black Sea ports became scrap export hubs. Scrap was easily accessible inside the region and could be barged down rivers to ports like Odessa and shipped across the Black Sea to Turkey.....