17/02/2015 – What’s Fueling Scrap Steel’s Fall?

 

This is part two of a series on the collapse in scrap steel prices. See part one for more background on the scrap situation. Guest contributor James May is managing director of Steel-Insight.

The global scrap to billet price spread fell to less than $100 a metric ton in January. That was unsustainable as that is below the cost of melting scrap to make billet. Either scrap prices had to fall or billet prices go up. With 80% of merchant billet currently supplied by integrated steel mills in China and the former Commonwealth of Independent States and iron ore prices falling, the obvious result was falling scrap prices.

While the relative position of metal costs is the fundamental reason, there is also some panic in the US market that contributed to the dramatic decline this month. The collapse in demand for tubular products for the oil and gas industries has led to idling or significant cutbacks at several mills – U.S. Steel Fairfield, Republic (that supplies round billet to U.S.Steel), V&M Star – while the reduction in energy demand will lead to lower order levels for flat product minimills from Steel Dynamics, Nucor and Svenskt Stål AB.

 

Source – MetalMiner