Scrap prices are skyrocketing, up around $80 a ton since December. (In late 2003 scrap sold for only $130 a ton). This is reminiscent of 2004 when skyrocketing scrap prices coming off a market low increased steel prices over 50% in only 6 months.
But this price increase is coming off of a volatile plateau that is already 4 years old; a long cycle for the industry. We are in new territory.
It is not driven by demand. Construction is tapering off, and car sales are slowing. It is a result of the weak dollar; domestic mills can get $100 per ton MORE for their product by shipping it overseas.
After a four year old market that has sucked a lot of the easy to get scrap out of the market; I question how much this new higher price will draw in. I doubt it will be as big an intake as we got in 2008.
In a market teetering on recession the ensuing higher steel prices could negatively impact demand and eventually send scrap prices and steel products down. That is how we would have looked at it 5 years ago.
With the triple whammy of a weak dollar, low inventories, and strong global demand, it is hard to predict how long this surge will last.
print