Ferrous

February’s American Metal Market ferrous average (for number one heavy melt) fell back to $75 per ton after the grade gained a few dollars in January. Positive momentum was not regained in March, as average prices throughout North America stayed low.

While ferrous dealers keep telling each other that mills are bound to restock their scrap inventories soon, the expected orders are not pouring in. One dealer notes that David J. Joseph has postponed any further orders for two mills it serves, one a Nucor mill and the other a mini-mill in Colorado.

“I’m trying to look for optimism and I’m just not seeing it,” says one Texas processor. “The prices just don’t give margins right now. I’m as discouraged as I’ve ever been in this business.”

The dealer fears smaller operators may not be able to take in enough material to make a living, while many larger yards with a fixed overhead will suffer too much red ink to keep going as well. He says medium-sized yards may have the best chance of making it through the current trough. “In the middle, you might be better equipped to hold out.”

Processors are talking about fundamental changes being made to the way they operate. Scrap will have to be bought at rock bottom prices or simply picked up at no charge for processors to find a margin. In some cases, processors may even have to charge a disposal fee. “Good dealers are going to have to get their scrap at rock bottom prices,” says one processor.

Looking further down the road, scrap processors will be watching to see whether North American steelmakers will be able to push through any price increases for their products. Most recent attempts to do so in the face of a global steel glut have been unsuccessful.