Scrap Yard 1

Peterson: Unraveling the enigma of April's scrap market dynamics

Written by Ray Peterson

For those of you old enough to remember “The King and I,” the April scrap market seems to be a puzzlement. While it is now clear that everything went sideways, one could clearly make an argument for prices to have been down.

With the announcement of up to seven April outages in the flat rolled sector of the steel industry and several other mills not running at full capacity, it would not have been difficult to push prices down at least another $20/GT.

From what I have been able to determine, the plants feeding the auto industry have not backed significantly off their production of prompt industrial scrap. I have been told that the flow of shredder feed increased during March, and there has been an increase in demolition projects, especially in the Cleveland market. A number of dealers are not seeing robust flow of scrap across their scales but that is nothing new.

Putting this all together, one could certainly see at least some downward pressure on scrap pricing in April. Two weeks ago, I was hearing a “sloppy sideways to down 10-20.” And then things started to change. I noted that the minions of a very large scrap company were not out making the rounds of the smaller dealers to talk the market down. This flew in the face of tradition so something was up – or at least sideways.

In fact, I was told by several very reliable sources (aren’t they all?) that the aforementioned scrap company was actually pushing sideways very hard. Tis a puzzlement! So what does this mean for May and beyond? I would like to say that I have good idea of what is to come but that would not be very accurate. My feeling at present is that we have reached a bottom, but steel imports increased in March, and I don’t have an optimistic view of the overall economy.

The best I can say is that without any significant pressure on either side of the steel/scrap divide, May pricing is probably not going to be drastically different from April.

Ray Peterson

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