Ferrous

Amounts paid by steel mills in the United States for ferrous scrap in October could be described as flat, but, as plateaus go, this one is fairly high in altitude.

According to data collected for the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates, Pittsburgh, domestic mills paid an average of $262 per ton for No. 1 heavy melting steel and $323 per ton for No. 1 busheling and bundles.

Although prices are healthy, ferrous scrap recyclers remain concerned about several other matters.

Ideally, strong prices can provide comfortable margins, but, even so, income and profits can be limited if scrap flow slows down to a trickle.

A scrap buyer in the Southeast notes that a folding table and chair manufacturer in his region was given the "China price" lecture by Wal-Mart, and, as a result of subsequent off-shoring, anticipates using just 7 million pounds of steel in its domestic manufacturing in 2008 versus some 40 million pounds used this year.

Scrap generation at appliance manufacturing plants is also likely to remain tepid as the new home market stays well off from peaks hit earlier this decade.

Concern also lingers about obsolete scrap and whether sustained high pricing has squeezed out a lot of the dormant scrap from urban and rural reservoirs. "September was one of the slowest months in the past two years," says the Southern recycler. He notes October brought out a little more scrap, perhaps in anticipation of weaker pricing to come.

A Chicago area recycler cites demolition scrap as an ongoing bright spot in the market and lists as his biggest headache not flow or pricing, but rather obtaining rail cars for outbound shipments.

At odds with seemingly reduced flows are significant investments being made or considered in both scrap processing equipment and steelmaking capacity.

Smaller recyclers eager to stay competitive and the newly merged giants are announcing shredder plant and other equipment purchases this fall—sparking concerns of overcapacity among some recyclers.

If ferrous scrap recyclers would like an additional cause of premature graying, anti-theft laws being passed in cities and states seem to be providing it. While nonferrous metals like copper and stainless alloys are the primary theft targets, some laws are being broadly written to include all scrap metal, including iron and steel. In many cases, such laws are placing the primary burden on recyclers themselves in terms of enforcement and potential punishment. "Why not go after the actual criminals?" asks one recycler.

Ferrous shippers can continue to take comfort that global steel production remains healthy, so if they can find the scrap, they will have a market eager to bid for it.

(Additional news about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com).

MSA/RMDAS^TM MONTHLY FERROUS SCRAP PRICE INDEX