Ferrous

Ferrous scrap buyers and sellers alike expected to see a drop in pricing in late 2004 and early 2005, and they anticipated correctly.

The question was just how steep the drop would be, and the answer is: It depends. While premium grades, such as the bundles offered by auto stamping plants, lost $40 or more per ton, some of the lower grades held onto their strong pricing, or perhaps fell only $10 or $15 per ton.

At least one dealer says this shows the willingness of many mills to seek out grades with less desirable chemistry to save on scrap buying costs. The mills can then upgrade the chemistry with alternate iron/scrap substitute units (DRI, HBI and pig iron) that are now selling at a price well below premium scrap grades.

"A lot of substitutes are coming in at a lot lower cost than scrap," says the Midwest dealer. "No one wants to spend for the higher grades, so those prime grades are down considerably, and probably will be for another 60 or 90 days," he speculates.

To some extent, the change in mill buying tactics caught some processors by surprise. "Companies had good years, and not everyone was anxious to sell in December," says the dealer. Dealers who figured they would sell the material in January and get 2005 off to a good start were, in some cases, left with scrap on the ground.

This same supply dilemma could keep pricing soft for the next couple of months as well.