Investors in steel companies probably can’t remember the last time “wide margins” and steel were seen together in the same sentence. But some scrap dealers believe steel mills have squeezed fairly decent margins between scrap purchases and the prices for finished products.
Ferrous scrap dealers in the Midwest and the Southeast report per ton prices paid by the mills for some grades finally increased in late July and early August. But the length of the trough at a time when steel prices were rising has some dealers convinced mill buyers have been achieving wider margins.
Noting first-half 2000 price trends were similar in their decline to first-half 1998 prices, one dealer also said the situation is not necessarily identical. “In 1998, mills not only dropped prices, they also stopped buying,” the dealer says. “Today, they’re still buying but there’s no willingness to pay at increased prices.”
The first bump up in some time, when it finally came, was not especially large. “We’ve stopped the bleeding, but I don’t think the market has healed yet. The price has stopped falling for the first time since January, but the overall falling trend may not be finished,” adds the Southeast dealer.
A Midwest dealer is slightly more optimistic. “We saw some encouraging signs come August 1, with some markets up $2 or $3 per ton. The mills are still buying aggressively and their melting rates are still satisfactory. The number one grades are in demand in our region, at least.”
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