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A wild year for scrap prices

Keywords: Tags  AMM Comment, AMM Steel Scrap Conference, Allan Goldstein, AMG Resources Corp., Institute of Scrap Recycling Industries’ Commodities Roundtable Forum, Steel Market Intelligence, John Ambrosia

What a difference a year makes. At AMM’s fifth annual Steel Scrap Conference in Chicago in November last year, much of the talk was about the remarkable run of stability the market had seen during 2011 up until then.

“The past 10 months have been a sea of tranquility in terms of pricing,” Allan Goldstein, president and chief executive officer of AMG Resources Corp., Pittsburgh, told conference attendees. “However, it changed this month and scrap took a tumble. It is always easier to analyze it after the fact, and I believe it is a sharp dip in export demand.” November was the first month last year to experience any significant drop in scrap value, although prices rallied in December.

In January 2011, average scrap prices--a composite of No. 1 heavy melt, No. 1 dealer bundles and shredded delivered to consumers in Chicago, Philadelphia and Pittsburgh--stood at about $462 per gross ton, their highest level since just before the global economic collapse and one of the highest levels in history. The year was marked by a nearly unprecedented level of stability, as prices barely moved more than a few dollars month to month between March and October, leading to the highest average annual scrap price in history.

Although prices barely fluctuated in 2011, this year has been an entirely different story. Scrap prices averaged $468 per ton in January 2012--no year in history had ever started with prices that high--but since then have fallen to around $323 per ton in October.

At the Institute of Scrap Recycling Industries’ Commodities Roundtable Forum in Chicago in September, many spoke of a changing environment in scrap markets. Michelle Applebaum, managing partner at Chicago-based Steel Market Intelligence, said that “volatility is here to stay,” reflecting an overall disequilibrium in nearly all aspects of the steel industry. Others voiced concerns about scrap’s wild ride.

Goldstein’s words last year were not only descriptive, but prescient. Although overall domestic raw steel output has crept up somewhat during 2012, the ferrous scrap export market has been flat to down. The result has been a scrap market that so far has been defined by volatility.

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