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Market Focus: Ferrous metals August 2015

Ferrous scrap merchants are bracing themselves for further price reductions this month as trade drops off for many during the summer slowdown.

Merchants that MRW spoke to said they had seen prices go down by up to £20 per tonne across the categories during the course of July, further consolidating the overall downward trend this year. Most were expecting prices to fall even further in the coming weeks, causing several to describe the market in very bleak terms.

“We are assuming the price will come down again next month,” said one north-east merchant. “There is very little demand and trade is very, very quiet. We’re OK because we’ve got some contracts. But if you’re a yard and are just relying on members of the public to come in, then business will be absolutely dead.

“The other thing is the price of iron ore which is becoming cheaper. If mills are using more of that, it’s going to affect the price of scrap.”

Another said they had not sold any ferrous scrap in two weeks and described the price situation as “terrible”.

“Light is down to about £50 and £80 for a bit of number one,” the merchant said. “We’ve been shutting the yard early – we’re normally busy this time of the year with clear-outs.”

A merchant in Wales also reported exceptionally quiet gate trade: “Prices went down £10 per tonne recently and I’m expecting another drop of the same in the next week or so. Overall, prices will be down by between £15 and £20 per tonne since the beginning of July.”

It was a similar story in the northwest and the south of England. Currency fluctuations, lack of demand, lack of availability of material and summer holidays were all blamed for low prices and quiet yards. Some merchants said the availability of cheaper imports was affecting demand for UK scrap exports.

Prices paid for light iron ranged from £45 to £70 per tonne among the merchants that MRW, spoke to but a couple said that they were no longer paying for it.

“Prices are down by £25 per tonne but I have no idea why,” said one Scottish merchant. “Trade is very quiet. With light iron we are getting to the point where we might not be able to take it any more.”

And a Welsh operator added: “With light iron, we are taking it but we’re not paying for it now. It’s not been like that since the last recession in the early 1090s.”

The summer period has mixed effects on merchants. The holidays mean a period of almost standstill for some, while others benefit from the fact that some factories and businesses use the period as an opportunity for a clear-out.

But one trader in the Midlands said that, so far this summer, trade was different to the usual pattern: “People normally shut down and go on holiday this time of year, so sometimes they get rid of scrap beforehand. But with prices so low, they are hanging on to it in the hope – the vain hope – that prices will get better.”

He said he was expecting further falls, driven by mills wanting better prices to make the UK more competitive with prices in Europe.

A north-west merchant said his firm had been kept busy from local factory work, so was getting material, but that export demand for scrap had fallen.

“Locally, there has been one or two factory shut-downs where they keep on a skeleton team to give it a bit of a tidy up and a clean-out, so we’re still busy,” he said. “But I’ve heard there will be another price drop this month.

“For exports, Turkey is full because the Chinese have sold them a big load of scrap.”

One or two merchants also noted with concern a fall in non-ferrous prices. A Scottish operator commented: “Ferrous prices have been dropping consistently since January – not every month but generally downwards – but this is the first time we are now seeing a drop in non-ferrous.”

Merchants that MRW spoke to felt that, generally, there was no likelihood of the market improving in the foreseeable future.

One southern trader summed up the sentiment: “Prices were down £15 to £20 per tonne in July and the talk is of them going down again. It’s quiet for the holidays and I don’t see it getting much better.”

Many felt there was little room for prices to go down any further, with many firms already squeezed.

One merchant said: “Someone who has got a lot of money and somewhere to keep all the scrap could make a lot of money, with the cheap prices now. But I’m getting rid of everything as soon as it comes in because if it’s going down another £10, that’s my margin gone.”  

MRW spoke to 13 merchants to produce this report     

 

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