2012 scrap prices have made distributors anxious

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

Tags  ferrous scrap, ferrous scrap prices, steel distributors, NLMK USA, Nucor Corp., AK Steel Corp., steel sheet, steel plate ArcelorMittal USA Inc.

The relationship between ferrous scrap prices and service center orders and inventories isn’t always the first factor market participants consider when assessing steel sales, but recent pricing activity has highlighted the important role that it plays.

As scrap prices fell in September and early October, distributors kept a close eye on raw material negotiations, looking for signs of how steel prices and overall steel demand could be affected.

During that period, steel prices did not rise, despite some manufacturer statements that hikes were on the way, and steel shipments fell in both August and September.

But then, amidst a market consensus that scrap prices had bottomed out in October, NLMK USA, Nucor Corp. and AK Steel Corp. increased prices mid-month for all sheet products by $40 per ton. Those decisions to raise prices followed an apparently leading move by U.S. Steel.

The moves immediately prompted some ordering, mill and distributor sources said.

“No one can believe it,” one Midwest service center source said. “Everybody we’re buying for, they know the price is going up so they’re trying to beat the price.”

But some buyers weren’t able to get in and place orders ahead of the hike, a mill source said.

“It’s interesting that this (price rise) has occurred a couple weeks earlier than last year. I think it’s caught some distributors and OEMs (original equipment manufacturers) off guard, which from a mill perspective is a good thing,” he said.....