Steel scrap prices are high but in disarray

Tag : Steel Making
Steel scrap prices are high but in disarray End of auto bundle auction highlights need for a new indicator -- Purchasing, 7/9/2008 12:15:00 PM
Chrysler has followed Ford Motor and General Motors indiscontinuing monthly scrap auctions, making it impossible to trackthis grade of prime steel scrap. Many in the steel industry haverelied on the auto industry's factory bundle (i.e., auto bundle)auctions as a pricing indicator. Chrysler was the last of theDetroit Three to abandon the practice of auctioning factory bundleseach month, apparently since the automaker was disappointed bidshadn't been as high as prices for such comparable dealer scrapgrades as No. 1 bundles, No. 1 busheling and shredded auto scrap.

General Motors sells its auto bundles back to the steel mills on aformula price. Ford is doing the same with much of its bundleoutput and swapping the rest back to mills for a discount on newsteel coils. Chrysler reportedly is selling its bundles throughmonthly price adjustments to Omnisource, the scrap subsidiary ofthe Steel Dynamics mill.

Purchasingdata.com, Steel Business Briefing , American Metal Market and various market analysts have been seeking new marketplaceinformation sources without much luck so far. American Metal Market recently told subscribers that “ferrous scrap buyers andsellers are scrambling to make deals for the month (of July) butare finding the going tough as they try to arrive at a meeting ofthe minds on prices.” The issue is important, says analystCharles Bradford at Bradford Research/Soleil Securities,“because scrap pricing is the usual leading indicator forsteel prices.”

Bradford tells clients this week that “the data collected byManagement Science Associates may be a good indicator of themarket, but the data doesn't come out until the 20th of themonth.” Thus, it will become important to highlight scrappricing coverage of No. 1 heavy melt steel scrap bundles (primeprompt scrap, such as metalworking residue) and shredded steelscrap (obsolete scrap, such as auto hulks and old appliances).

Purchasingdata.com already is polling buyers on prime scrap. Iron Age reports shredded scrap in the Midwest at $533.50/gross ton while Platts Steel Daily has shredded scrap at $565/gross ton this week, American Metal Market has reported $595 and Steel Business Briefing is posting a $605 price.