Predicting the ferrous scrap market’s next move
May 29, 2012 | 04:42 PM
| Lisa Gordon
The ferrous scrap markets significance to the steel industry is deeply rooted, and its direction is keenly watched as a result. But trying to predict its next move can be much like betting on horse racessometimes you pick the winner, sometimes you dont.
Obsolete and discarded metallic objects play in big role in everyones pocketbook. Scrapyards keep an eye on the dynamics to maximize their profits, electric-arc furnace (EF)-based steelmakers scrutinize the market because scrap is their largest input cost, and finished steel buyers watch scrap prices as a harbinger to buy or move to the sidelines to wait for a better deal.
Yet despite the next-to-impossible task of accurately predicting where the market will head, there are a host of indicators that can make it easier to turn the odds in your favor. Understanding factors that drive the scrap market and paying close attention to numerous cuesranging from the London Metal Exchange billet contract to imports and exports to end-of-month cancellation rights being exercisedare essential for all prognosticator wannabes trying to decide if it is a buyers or sellers market.
The monthly ritual to determine where prices are headed is colloquially known as The Dance and the tempo that emerges is a clear sign for near-term scrap prices. Whichever party seems to be dragging their feet typically has the edge.
When mill buyers make offers and scrap dealers procrastinate, there is an expectation that prices are headed upward. Mills will test the market and offer sideways, while dealerssensing higher priceswill hold off for a better offer. But when mill buyers are slow to enter the market, it usually means their suppliers will be offered less money; an unaggressive mill buyer might be out of the market because the mill is oversupplied or scheduling routine maintenance, but relaxed buying by mills is generally because prices are falling.....
To access AMM's full content, please log in below. If you do not have an AMM account, we invite you to take a free trial or subscribe below.
Already a registered amm.com user?
Access to amm.com editorial content is granted only to paid subscribers and trialists. If you do not have an active account in your own name, please either subscribe or take a trial and you will have instant access to amm.com content. Sharing your login credentials with individuals who are not subscribers represents a violation of AMM copyright.
Every morning, every minute no matter how often you follow the markets, there's an AMM subscription to fit your needs.
Not sure if you are ready to invest in a subscription right now? Take a free, no-obligation trial. Start your free trial today.