Auto cuts, furnace outages take bite out of ferrous scrap

Oct 06, 2006 | 11:37 AM | Michael Marley

Prices of industrial steel scrap are down as much as $35 a long ton in the major steelmaking markets this month, while the seemingly less desirable obsolete grades are off by only $10 to $15 a ton, sources said.

The so-called prime grades of steel scrap—baled and loose sheet steel from stamping and other manufacturing plants—have lost the luster they enjoyed for much of this year because of growing weakness in the flat-rolled steel market and both scheduled and unscheduled production outages at many sheet mills.

The declines in the dealer-market grades of industrial scrap came close to matching the price decreases seen in the sales of some of the auto industry's factory bundles late last month. Prices for the auto bundles, which are often seen as a bellwether of prompt steel scrap pricing trends, were down an by an average of $40 a ton as measured by the AMM Factory Bundle Index.

Several scrap brokers and processors pointed to production cutbacks by automakers as the main driver for the price slide. Demand for sheet steel has faltered in recent weeks, and some flat-rolled mills are curtailing steel production and therefore buying less scrap from outside suppliers. Some have also scheduled maintenance work for this period, thus reducing steel production, but others have said they will trim raw steel output to bring inventories in line with demand.....