Steel scrap prices could rise sharply
By Peter F. Marcus -- Purchasing, 11/4/1999 2:00:00 AM
Given the strong likelihood of rising global steel production through at least mid-2000, global demand for obsolete steel scrap in the steel and foundry industries in the first six months of 2000 may rise by 8%-13% on a year-to-year basis. This expectation is the principal reason why steel scrap prices could surge in 2000, rising to $135/gross ton or more by next summer. And whenever steelmakers' costs for metallics rise, so do product prices.
The price of No. l heavy melting scrap (composite price for Chicago, Pittsburgh, and Philadelphia) fell from $138/ton in January 1998 to only $73 in December 1998. That's because from August 1998 through February 1999, global requirements for obsolete steel scrap were down 6%-11% each month on a year-to-year basis. With demand perking up this summer by about 7% on a year-to-year basis, the September 1999 price was back up to $100/ton.
We see more balanced supply/demand for the global steel industry in 2000. Global steel demand in 1999 is probably near the record high reached in 1997 before there was much of a negative impact from the Asian financial crisis. On top of that, apparent global steel demand in 2000 should rise 3%-4%, based on the combination of a several percent rise in steel consumption and some addition to inventories that are held by steel users. Many global economic indicators are positive for 2000.
So with global steel demand expected to rise monthly between now and well into next year, scrap prices are poised to rise sharply. Our forecast is that the price of No. 1 heavy melting scrap in the U.S. may rise to $135-$140/ton by next summer.
Peter F. Marcus, managing partner of World Steel Dynamics, is a metals consultant and founder of various metals data services. He is at 456 Sylvan Ave., Englewood Cliffs, N.J. 07632
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