Is it 2008 again? For ferrous scrap prices it almost looks
like, as Yankee catcher Yogi Berra once said,
déjà vu all over again. The steady climb over the
past few months might make some believe that.
Ferrous scrap prices rocketed to as high as $500 per long
ton. That may not match the $900-per-ton figure that prevailed
for a brief period two-and-a-half years ago, before the market
came crashing down at year's end. However, at that time it was
factory bundles and other prime grades of industrial steel
scrap that were racing ahead of the pack-in some instances by
as much as $400 per ton. That's not the case now. If anything,
the secondary grades are close on the heels of industrial steel
scrap tags. No. 1 heavy melt was quoted at $440 per ton in key
steelmaking cities like Chicago, Cleveland and Pittsburgh in
January, with prices paid for shredded scrap ranging from about
$450 to $480 per ton in most regions. There wasn't much of a
price differential between shredded and No. 1 busheling in
January-no more than $10 or $20 per ton in most regions-which
some veteran brokers and dealers saw as a little odd, given the
better yield melt shops normally get when using busheling
instead of shredded.
The price pattern through the latter part of 2010 was unlike
the madness that characterized the market in 2008. For one
thing, a harsh winter has discouraged peddlers and dealers from
going out and scouring the countryside for old iron pipe and
steel scrap. Major scrap processors that handle much of the
so-called retail trade were reporting a slow flow into their
Second, there are few big demolition jobs, and that's not
just because of the season. There haven't been many for the
past year or two, and such jobs are even slower now that the
cold weather has arrived. And lastly, perhaps, is the federal
government's "Cash for Clunkers" program; while it helped
automakers unload some of their excess inventories of new
vehicles, it also drained a lot of junk cars off the
At the same time, demand for new steel products has
rebounded, both in the United States and overseas. Housing and
appliance markets might still be weak, but the auto industry
and their suppliers are more active than they had been in the
Ferrous scrap demand from overseas also is strong. Prices as
high as $550 per tonne were being paid in both Turkey and the
Far East, bringing strong price pressures to bear on domestic
steelmakers. Export yards on the East Coast were quoting $410
to $420 per ton for No. 1 heavy melt from local suppliers, but
they also were wooing yards in western Pennsylvania and eastern
Ohio with offers of $450 per ton. Part of that premium covered
the higher freight costs to the coast, but it also served to
draw material away from steel mills in those regions.
It's an expensive new world for ferrous scrap consumers.
There's nothing new about that. What is surprising, though, is
the tenacity that many foreign mills display in their efforts
to get enough raw material.
The domestic steel industry's modest specifications for a
catch-all grade like No. 1 heavy melt don't apply to the export
trade. Some dealers joke that they only have two requirements
to fulfill for foreign mills Does its stick to a magnet and
does it sink in water?
And there's a new twist on the "Cash or Clunkers" program.
Call it "Clunkers for China." Some West Coast auto wreckers are
flattening vehicles and loading them into seaborne containers
for export. One auto wrecker figures that a junkyard can get
from six to eight crushed hulks in a 20-foot container. The
Chinese have been building new megashredders in the past few
years. Demolition work there has been feeding these monsters,
but now it appears they have an appetite for old vehicles,
which an emerging economy like China lacks.
Many domestic mills now find that not only are they
competing against each other in their efforts to buy scrap each
month, but also their foreign rivals. They have to figure out
how to do that without agreeing to take scrap that is too thick
and slows down the tap-to-tap time, and thus the economics of
steel production. Or should they take in sealed units that
might contain toxic materials like mercury or polychlorinated
biphenyls that will contaminate a heat?
That could be the reason why we're likely to see more steel
mills in the market for scrap companies in the not-too-distant
future. Steel Dynamics Inc., Fort Wayne, Ind., gobbled up
OmniSource Corp., and Nucor Corp., Charlotte, N.C., married its
longtime partner David J. Joseph Co. Even Timken Co., which has
a massive shredder next door to its Canton, Ohio, mill, has
bought a couple of mid-sized Ohio scrapyards in the past year.
Are there other targets?
The simple explanation is that this might be the only way
that some electric furnace mills will be able to ensure their
scrap supplies in the future. Their older brethren, the
integrated steel mills, had no such worries about raw material
supplies in the past, and even these days, because they either
owned the iron mines or had long-term contracts with those they