Scrap Rules

Steel market psychology – the “chill” factor is getting a stronger toehold

Given the further incredible upward spike in steel scrap prices (up about $125 per gross ton for auto-bundles in the USA on May 2, 2008), WSD is convinced that the speculative element in the steel market is now so excessive that the beginning of a period of decline may be no more than a few months away.  It’s only a matter of time, we think, until the high price of scrap will, at least temporarily, bring out enough new supply (via collection) to drive down the price. 

Once steel buyers perceive that world steel export price for hot-rolled band has crested, which until today’s steel scrap price shocker was probably becoming the prevailing opinion, we think the next step is for many of them to anticipate that the steel price direction is about to turn down.  If so, buyers will start to withhold their orders.  Now, given the surge in the scrap price, they may be less convinced that today is the time to pare orders.

Here’s a list of reasons why the price of hot-rolled band on the world spot export market, FOB the port of export, which is now about $1,000 per tonne versus $601 per tonne at the start of the year, may fall back in the months ahead: 

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