[FERROUS]

RIDING THE WAVE

The price of ferrous scrap drifted slightly downward in June, according to the American Metal Market index, but if early July is any indication, the three-month downward trend is now reversing.

Dealers on both coasts as well as inland are reporting that reinvigorated overseas demand for ferrous scrap is pushing up prices, and Chinese steel mills in particular are back up to full strength after a month or two of quieter buying activity. The quiet spell may well have been related to the SARS scare, which—though short-lived—temporarily resulted in less business travel, less household consumer buying and, in some cases, temporary labor shortages in many sectors of the Chinese economy.

With the SARS scare seemingly in the past, China is back to normal as an engine of economic activity.

While east and west coast shippers are typically the first to get a sense for increased Asian buying, even dealers well removed from the coast say there is a consensus that prices will rise with the renewed demand.

One scrap dealer in northern Ohio—who ships most of his scrap to two nearby domestic mills—says even those Midwest mill buyers are "bracing" for the price increases.

"Markets are up $10 to $15 per ton over what they were at the beginning of the month," the Ohio dealer notes as of mid-July. "The Chinese buyers are sucking the scrap out of the country."

Many dealers, though happy with the price increases, wish they had more scrap to offer on the market. Industrial production remains in a slump domestically, while much of the obsolete scrap inventory was run through shredders in the first four months of this year when prices moved upward during that stretch. "I am getting just barely enough [scrap] in to keep my equipment running," says the Ohio dealer.

Dealers are not optimistic that increased prices will bring any additional scrap out of hiding. "Where is it going to come from?" asks one skeptical southern Ohio scrap dealer, who is waiting for industrial production to kick back in.

August 2003
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