Ferrous

Winter of Discontent

Severe weather warnings have been the only good news for most dealers of ferrous scrap in December and January. Winter weather has hindered scrap collection on a regular basis, keeping the scrap supply in check.

A bump up in ferrous scrap prices during the two-month period is most likely due to ice storms in the South and steady snow in the North, dealers and processors say. One scrap company co-owner compares the price hikes to throwing a dog a bone—just barely enough to keep the mutt going.

The bigger picture brings more worries than comfort. “Things are really so damn bad,” one processor says, referring to pricing and mill order levels.

Many of the mill orders are from outside this processor’s usual selling territory. “We could sell more scrap, but out of our territory. The freight would be so high, it would be selling at a loss for us,” he comments.

Unlike during other pricing troughs over the past two years, incoming supply from industrial accounts is also dropping, pointing to the wider economic slowdown that most economists contend is occurring.

“Industrial accounts are off 35% to 45% in their scrap generation,” notes a southern scrap dealer. “Some plants are laying people off. One of our larger industrial accounts shut down its third shift and has slowed production on the other two shifts.”

Worrisome to most scrap suppliers has been the escalation of steel company bankruptcy filings and the whisperings of more Chapter 11 filings.