Ongoing technology advances and the shutdown of obsolete production capacity are eroding the availability of off-prime steel

Jun 01, 2010 | 05:36 AM | Scott Robertson

Secondary steel is in its own ballgame that, for the most part, runs counter to the prime market, at least where buyers are concerned.

Steel buyers who do most of their business in the prime steel market are used to the economic laws of supply and demand and how they impact steel pricing and availability—when supplies get tight, prices head north, and vice versa.

But those in the market to purchase secondary or excess prime coils have to play a slightly different game. Thus, in periods like the first half of 2010, when steel prices shot higher as raw material prices increased and steel demand improved, secondary material became less and less available and put a squeeze on buyers seeking bargains from the market.

"In a stronger market, you don't see much secondary or excess prime material out there," according to Steve Bergman, president of Premier Steel Inc., Englewood, N.J. "When the availability of secondary and excess prime starts to gain, that generally is a leading indicator that the market has topped. We haven't seen that yet."

Bergman made those comments shortly after North American steel mills announced another carbon steel sheet price increase—their fifth of 2010—of about $40 per ton on the back of increasing prices for scrap and iron ore as well as continued improving demand, much of it from customers in the automotive industry. The increase put hot-rolled sheet prices at about $740 per ton by late April.....

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