PITTSBURGH Domestic scrap
prices are showing no sign of erosion in the near term as
strong global demand and a decent U.S. appetite, among other
factors, will work to keep prices from sliding, according to
Sims Metal Management Ltd.s top executive.
Daniel Dienst, chief executive
officer of the worlds largest recycler, told inventors
during a conference call Wednesday that after months of
weakness, domestic scrap prices appeared to have found their
floor in July.
"We are a bit on the flip side
right now where the U.S. market has firmed significantly and
moved higher. Some of that is being driven by disruption
threats due to low river levels," Dienst said.
Low water levels on the lower
Mississippi, Ohio and Arkansas rivers are pushing up freight
costs and threatening to crimp scrap availability in some
regions, sources told AMM earlier this week (
amm.com, Aug. 21).
Meanwhile, export demand remains
strong, helping to keep a floor under prices, Dienst said.
"There have got to be 40 to 50
cargoes to be bought (globally) in the next four to five
weeks," he said during a call to discuss the companys
Australian $521.4-million ($546.25-million) net loss during the
12 months ended June 30.
About 48.3 percent of Sims
overall annual revenues are derived from ferrous trading,
according to its earnings.
Scrap demand appears
particularly strong in some parts of Eastern Europe and Asia,
"Look at the market right now,
and there is not a tremendous amount of scrap laying out there.
The (Mediterranean) consumers of scrap are probably as short as
anyone has seen in quite a period of time," Dienst said.
Meanwhile, Turkey will be coming out of its Ramadan holiday and
looking for scrap, he said.
South Korea also needs scrap,
and scrap prices in Japan have increased by some $25 a tonne in
the last few days. "We are coming out of summer and people are
generally short going into winter," Dienst added.
Dienst noted that while the
ferrous export market often mirrors the iron ore market, that
is not the case at the moment. "There has historically been a
high correlation between iron ore and ferrous prices, but there
are always periods of time that there are extreme dislocations
with that relationship. The deep sea ferrous market is
outperforming the debacle in the iron ore markets," Dienst
In addition to global factors
and falling water levels on the Mississippi River, the
potential for a labor strike at two major integrated U.S. mills
is also bolstering the likelihood that scrap prices will not
retreat in the near term, he said.
U.S. Steel Corp. and
ArcelorMittal USA Inc. are currently in separate negotiations
with the United Steelworkers union in an effort to reach new
labor deals before their existing contracts expire Sept. 1 (
amm.com, Aug. 22).
If no deal is reached, its
possible one or both companies could experience a strike or a
lockout. That fear has caused some steel buyers to re-enter the
market to stock up on metal, he said, giving steel prices some
"It is forcing people back into
the market," he said.
Additionally, a strike at one of
the major integrated mills could boost demand at their
mini-mill competitors, keeping scrap demand elevated, sources
have told AMM.