(From Steel Market Intelligence: www.michelleapplebaum.com .)
Scrap Prices Dive Again in October
According to just-published data from American Metal Market (AMM), October prices for shredded scrap (obsolete) plummeted $47 (or 12.3%) to $335/ton and #1 busheling (prime) scrap plunged $50 (or 12.9%) to $337/ton, bringing the two-month drop to $75/ton and $83/ton.
The sharp declines were driven by near two-year lows in domestic steel production as well as weakening global steel production, pre-election jitters keeping purchases for both scrap and steel at a minimum, strong prime scrap generation from still-high auto output in the face of falling sheet demand, and catch-up with declining iron ore and pig iron prices, which fell 26.1% and 5.1% over the prior three months as compared to scrap which rose 1.8%.
We suspect the prime to shredded ratio – which is now near parity and the lowest level since November 2008 - put a floor under prime grades, although we are surprised there has not been more substitution of the higher-yielding prime grades earlier.
Outlook.
We expect to see continued pressure on scrap prices as weakening global steel production, tepid iron ore prices and continued global economic jitters offset normal seasonal strength, which we do not expect to see until year-end.
Sources: Steel Business Briefing, American Metal Markets and Steel Market Intelligence.
