December 02, 2008

Scrap prices establish new baseline - Canaccord

According to Mr Eric Glover analyst of Canaccord Adams, soaring scrap prices may never return to previous levels.

Mr Glover said that recently buoyant markets may have established a new floor for scrap pricing, which may be as high as USD 250 per short ton, as compared with an average floor of between USD 80 per short ton and USD 125 per short ton for much of the 1990s. In 2004, Mr Glover said the floor spiked to USD 200, but even that level is now obsolete.

Mr Glover said that "Scrap is an increasingly valuable global commodity and the pricing floor continues to go up. We keep establishing new, higher pricing floors. Even USD 300 may not be too high as a new floor. Think of it like gas prices. You would not see USD 2 gas anymore."

He said that robust offshore demand and tightening US supplies have driven ferrous scrap prices to record heights, with the Platts prices assessment for shredded scrap, delivered Midwest, rising USD 160 to a midpoint of USD 555 most recently.

Mr Glover said that US exports of ferrous scrap have more than tripled from 5.2 million tonnes in 2000 to 16.4 million tonnes in 2007. People are paying higher prices to pry scrap away from others.” He added that further, growth in electric arc furnace capacity will drive additional scrap demand.