A Key to Steel Pricing is Scrap
I have been watching scrap prices over the past few weeks since Chrysler stopped the auction process which was used to create the prime bundles market pricing. According to Steel Business Briefing’s scrap reporter, with whom I converse on a regular basis (who is a steady reader of the Steel Market Update and calls my newsletter a “must read”); the price of prime scrap has risen by $130 per ton to $885-$900 per ton since June.
Shredded scrap has been moving higher as well and is currently being quoted at $600-$610 per ton and is believed to have room to move even higher as the month progresses due to the wide spread between prime bundles pricing and that of shredded scrap. According to SBB’s sources the expectation is for shredded to go to $620-$640 per ton.
Scrap is used by all mills – whether fully integrated (BOF) or mini (EAF) and a number of mills are reported to be short scrap at the moment.
Higher scrap prices are going to put pressure on the domestic mills to keep prices up and perhaps be used in both contract negotiations as well as spot pricing as a reason for prices to go higher in the future. I am not advocating higher prices just trying to keep you aware of price pressures that may come back on the steel buying consumer at some point in time.