One of the odd parallels of the scrap market is that the
flow of obsolete ferrous scrap can be a lot like the life cycle
of a vehicle's lead-acid battery.
The dead-battery/dead-scrap-market analogy was apparent in
late June and early July, when much of the nation was
sweltering through 90-degree-plus temperatures and humidity
percentages that matched the mercury's numbers. The analogy has
an ironic twist since most scrapyards no longer handle dead car
batteries after being stuck with millions of dollars in cleanup
Anyone who has owned an older vehicle for several years
probably has learned the lesson about batteries. A car's
battery has a typical life-span of five to seven years, but it
can die young in the heat of summer just as easily as it will
on a cold winter's morning.
Most scrap peddlers and small dealers are not mad dogs or
Englishmen. In other words, they know how unwise it can be to
be out in the noonday sun in such heat and humidity. By the
same token, they also know it is foolish to go out in
mid-February when there is a foot of snow on the ground to
scout around for old pipe and other junk.
Larger scrap dealers and processing yards that have their
own fleets of cranes and front-end loaders are well aware of
how productivity can sink in the extreme temperatures of summer
and winter. Move a crane or front-end loader around on a cold
morning and something is sure to break, and because of the cold
it'll often take twice as long to repair.
Similarly, on hot summer afternoons burners-the guys who cut
apart thicker pieces of steel with a torch-aren't likely to be
at their most productive. Smart yard managers realize that. One
shifts the workday, bringing his burners in at 6 a.m. and
sending them home at noon; it might also be that he doesn't
have enough scrap to cut-remember, the small peddlers and
dealers stay indoors with the air conditioners cranked up.
Do people who buy scrap have the same wisdom? It did not
appear to be the case in late June and early July. The market's
rumor mill was at work-it works all the time, regardless of the
weather-churning out predictions that prices would be down in
July. Some prices had leveled off a bit in June and some had
even declined, and exports were weaker. The market would be
down $50 a ton or more in July, was the oft-repeated
As a result, those scrap dealers who had not shipped what
they sold earlier in the month got the usual end-of-month fax
or e-mail telling them that all the scrap not shipped by June
30 was unwanted. That's no surprise-industry veterans have been
getting those price-weakening, month-end cancellations from
some mills since the dawn of the scrap business.
These days, though, there seems to be a lot more dealers
saying the cancellations are meaningless, that they are not
troubled by them. Most had no scrap to ship and little
feedstock coming into their yards because of the heat wave.
In other words, the ferrous scrap market's battery had a
couple of dead cells, and a car battery with even a single dead
cell won't turn over the engine. For some scrapyards, it wasn't
just that one cell had died-the entire battery was drained.
Peddlers were not delivering scrap, demolition work had slowed
and auto wreckers were holding onto junked vehicles because
they didn't like the low prices that shredders were
When such slowdowns occur and brokers or mill buyers are
sure they can push through price cuts, their actions are likely
to produce the opposite result. Like a pair of jumper cables,
they can bring the dead battery to life.
Dealers don't have much to sell, but at the same time they
note that mills want the same quantities-and sometimes even
more-than it wanted the previous month. If there is less than
1,000 or 2,000 tons on the ground, they reason, why sell it at
$40 or $50 a ton lower than what the mill would have paid the
previous month? Sit on it and see what next week or perhaps
even next month will bring, they tell themselves.
Their fathers and grandfathers had to do that in the past
when the mills had no appetite for scrap. Today, however, it is
a different world. Demand for ferrous scrap is enjoying strong
demand, not just in the United States but throughout the
And there is no cheap alternative to ferrous scrap these
days. Three big companies (Vale, BHP Billiton and Rio Tinto)
control much of the world's output of iron ore and hence the
production of pig iron by the smaller blast furnace operators.
And the largest non-captive producers of hot-briquetted iron
are in Venezuela, a country whose socialist leader isn't too
fond of the United States. Add to that the steep climb in
offshore demand for scrap.
If ferrous scrap and other steelmaking materials are not
readily available, what else can a mini-mill use to make rebar
or plate? Air?
The power now lies in the hands of many large scrap
processors. And many know it. One veteran scrap trader in the
South has an irrepressible sense of humor about this. "If they
don't like the price this month," he laughs, "just think how
much they'll love it next month."