Ferrous

Mill prices for ferrous scrap remained relatively flat in July, but the plateau is lofty, as dealers and mills continue to trade in a per-ton price range that is far above the historic average.

Mills were able to pay a few dollars-per-ton less for ferrous scrap in July for all grades tracked by the Raw Material Data Aggregation Service (RMDAS) of Management Science
Associates Inc. (MSA), Pittsburgh.

In most cases, the drop was so small as to be barely
noticeable, such as the $1-per-ton U.S. average drop in the RMDAS Prompt Industrial Composite grade. That grade tracks mill purchase prices for No. 1 busheling and No. 1 bundles. Previously, the average price paid for this grade had jumped $31 from $313 in May to $344 in June.

When scrap dealers react to swings and drops in that range by changing their buying prices, generators take notice, especially in the auto body segment of the business.

According to a shredding plant operator in the Southeast, the auto recyclers in his region who regularly communicate when swapping components are also keeping each other informed of scrap price adjustments as they happen. "They talk to each other more than scrap dealers, so the minute someone offers a higher or lower price, they know about it," he remarks. "You can be down 30 or 40 percent in volume based on a $5 drop in the car body price," he adds.

The ability of these auto hulk generators to act in unison is giving them some market clout. "In a sordid kind of way, they’ve been able to control both the flow and the pricing," the Southeast recycler says, noting that as they hold back their feedstock, scrap supply and mill inventory levels drop, helping prices bounce back up during the next buy cycle.

Generators without the spare acreage of auto dismantlers are keeping most scrap yards busy, however. A California recycler says scrap "is still coming in pretty good," although in his market region other factors are affecting generation.

"In the agricultural region we’re in, people are concentrating on farming and not cleaning up their land," he notes. Additionally, a severe July heat wave that was claiming lives was also discouraging strenuous activity. "Today it’s going to ‘cool down’ to 106 degrees, so I think most people are deciding they’ll wait to do a cleanup later."

On the sell side, the Californian says that as of July, "We’re getting softer prices from overseas," but that "still, compared to five years ago, it’s a great market."

The slight drops detected by RMDAS in July are far from severe. Prices paid in July for No. 2 Shredded Scrap fell $4 on average throughout the United States, while on average $6 less per ton was paid for No. 1 Heavy Melting Steel (HMS).

But the $344 per ton for prompt (new production) scrap the month before marked the highest per-ton figure tracked by the RMDAS system in 2006.

A scrap recycler in Tennessee, though, says mills are negotiating to pay a lot less per ton for their August buys. "Their production isn’t down," he notes. "But their inventory is up, so they’ll offer less because they can."

Regionally, mills in the Southern United States are paying less on average for all grades of scrap, with the biggest spread taking place in the Prompt Industrial Composite grade. Southern mills are paying $19-per-ton less for the grade than mills in the RMDAS North Central/East region, and $12-per-ton less than in the North Midwest region.

The RMDAS Ferrous Scrap Price Index is based on data gathered from a statistically significant compilation of verified ferrous scrap purchase transactions.

(Additional news about ferrous scrap markets is available online at www.RecyclingToday.com.)