Ferrous scrap demand hot despite cold spell

Dec 16, 2010 | 10:30 AM | Lisa Gordon

Bad weather coupled with good demand are creating a perfect storm to drive scrap prices higher than most market participants expected.

Across the country, mills are bracing to pay higher prices to secure material in a supply-constrained environment, industry sources said.

Scrap prices have risen as much as $10 per ton during the past week and are expected to rise further in January when the next round of mill buying begins.

Mill buyers are putting on their poker faces so that they don't appear desperate for material, but sellers appear to have the upper hand.

One wire rod producer has already announced a price increase for February, saying prices are going up $50 per ton but haven't popped yet. Also, Nucor Corp., Charlotte, N.C., earlier this week was reported to be increasing prices on its flat-rolled products again, it's fourth such price hike thus far in December (AMM, Dec. 16).

Mills are actively raising prices, anticipating that scrap tags will jump higher and are getting ahead of the curve, a Pennsylvania scrap executive said.

One Midwest broker said fears that this winter weather might be more harsh than expected, and the abrupt change in the mills' buying behavior in December, have also fed dealers' expectations.

"December is normally the month when they don't want any scrap, but that has not been the case this year," the Midwest broker said, adding that many mills have been buying to get ahead and have material on the ground or in the supply pipeline before year-end. That, in turn, might have spurred their rivals to jump into the fray in order to avoid losing local scrap to distant mills.....