Domestic markets buy ferrous scrap by the numbers

Mar 31, 2012 | 07:00 PM | AMM staff

Tags  obsolete ferrous scrap grade, prime grade ferrous scrap, ferrous scrap prices,

The past decade has brought a number of challenges to the scrap and steel industries, not least among them dealing with the comparative relationships of the escalating value of raw materials, to which both sellers and buyers have had to adjust.

Nowhere has this change been more pronounced than in the ratio of the dollar value of prime grades vs. obsolete grades. Exactly 10 years ago, the value of prime grades hovered just above that of the obsolete grades, with only about $12 per ton separating them in average annual price.

But on average through the first three months of 2012 the spread stands at its fourth-highest in history, with the primes outpacing obsolete material by an average of $51.95 per ton, according to AMM pricing data. (Prime grade prices are defined as the average of No. 1 dealer bundles and No. 1 busheling, while obsolete grade prices are an average of No. 1 heavy melt and shredded scrap; prices are delivered to consumers in the Chicago, Philadelphia and Pittsburgh markets.)

This trend has reflected the systemic changes in scrap supply, exports and imports, melt mixes and competition, which have occurred during one of the most dramatic decades in the history of the industry. Yet prime grades still hold an important role in industry thinking and usage.

“Some people like to look at heavy melt for a gauge of the market’s health, but a lot of mills, as well as brokers and dealers, still focus on the primes,” one Midwest dealer said. “But the changes we’ve seen have maybe made that not the best way to view the market. Prime grades may still be more valuable, but they don’t really necessarily tell the story of what is happening every month.”....

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