Ferrous - Commodity Report

The ball may have dropped downward on New Year’s Eve in Times Square, but the ferrous markets were headed in the other direction in January, as pricing rocketed upward.

Shippers and domestic buyers of ferrous scrap pointed to export demand and tight supply as factors that led to the major price swing. The one-month increases of from $65 to $85 per ton surpassed the total paid for ferrous scrap throughout 2001 and at many other times historically.

By the end of January, some recyclers were saying that the price was already starting to scale back from a peak that may have been reached in the second week of the month. "In the second week of January, the mills were hesitant at some of the prices [and] they’ve taken some money back," says one scrap processor in the Upper Midwest. "Still, we ended up catching about $68 to $70 per ton."

Filling orders became the task awaiting shippers of ferrous scrap. "There are very few business days to take advantage of that pricing—that’s going to be a challenge."

Adding to the challenge in January was the behavior of speculators who, after a December price rise, may have been holding back for another price increase before selling material.

A mill buyer in the Eastern United States simply says that markets had "gone crazy" and is thankful that the particular mill he buys for was not especially low on inventory.

But market pricing seems to indicate that both domestically and globally, there are quite a few mills playing catch-up on inventory at the start of the year.

Export orders are also said to be strong, as the weak American dollar continues to make the United States a port of call for overseas mill buyers. Buyers representing overseas mills are not only placing bulk cargo orders, but also continue to arrange containerized shipments of ferrous scrap.

But even with a weak dollar, veteran recyclers remain mindful that a price that rockets upward is all too likely to plunge downward just as rapidly. With prices in January in the $350- to $410-per-ton range, there is a long way to plunge. "If the price went up $70, who knows how much it might go down when it swings back?" asks one recycler.