Scrap export demand firm; freight rates bite into profits

Dec 15, 2006 | 06:45 PM | Michael Marley

Overseas demand for ferrous scrap continues at a steady pace, but much of the modest price gains obtained in recent weeks are being eroded by higher ocean freight rates, U.S. exporters said.

Demand is still strong from the eastern Mediterranean and is likely to remain at current levels for the next few months, several East Coast exporters and traders said. Steelmakers in that region are busy and there is little scrap coming from Russian and Ukraine ports on the Black Sea. In addition, one trader said, winter has arrived in the former Soviet states, slowing the scrap flow to the docks even further.

Prices have inched up to $280 to $282 per tonne for the 80-20 mix of No. 1 and No. 2 heavy melting steel scrap popular with Turkish mills, one source said, while shredded is commanding a premium of about $5 a tonne.

The pace of offshore sales from East Coast export yards has drawn scrap from as far inland as western Ohio and Michigan, but one trader said he does not think that exporters will be reaching that far to buy scrap in the coming months. One reason is the usual seasonal slowdown in the output of obsolete scrap from demolition projects, another is that mills in those regions have raised their prices in an effort to hold on to local supplies. In addition, dealers are holding scrap, figuring the market will be stronger in January and February and prices will be higher.....