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Market Focus: Ferrous metals December 2014

Further downturns in the ferrous scrap market have seen many merchants proclaim that prices have now reached their lowest point in several years.

Drops of up to £15 per tonne on average at  the  end  of November were reported from merchants in several regions that MRW contacted. For some, this is in addition to falls of a similar amount at the beginning of the month, and more businesses are now reporting prices of as little as £60 per tonne for light iron.

Most merchants felt that prices had now bottomed out, although there were suggestions that there would be little respite in the near future and some were preparing for further gloom.

One merchant in the north-west said: “Prices are down £10 a tonne or so in the past week. It’s a disaster – the worst prices I’ve seen since 2009.

“It’s because of cheap Chinese steel and falling iron ore prices. I think there will be another drop this year and then it will pick up in the spring. The mills haven’t settled yet [as MRW went to press] but I think they want prices down.”

Some businesses reported a boost to parts of the export market. One merchant in the north-east commented: “Prices have reached the bottom now, which isn’t good, but some of the export markets are starting to go up – around $10 a tonne in Turkey and the same in India.”

But he added that this was likely to do little to make up for the sustained downward trend the market had shown in recent months: “Prices have come down $60 or so overall, so I don’t think going up $10 will make much difference to trade.”

He said there was a severe shortage of scrap in the region:  “No-one wants to bring it out for those prices.”

Other traders reported that gate trade was suffering and the market was now fundamentally changed.

“Currencies have levelled out and India is back in, but trade is very poor,” said one. “I’ve been doing this most of my life and it is not what it used to be – the past 10 years especially.”

The sentiment was echoed in the Midlands, with businesses seeing few signs that business might pick up before the Christmas holiday.

“Trade is very, very, slow,” reported one merchant. “There is no scrap and the market is totally depressed because of the prices. We were hoping it would pick up before Christmas, but it doesn’t look like that’s going to happen. People are hanging on to the metal they have.” Another had written off the rest of the year despite some recent improvement to business: “Some are talking about prices moving down this month but I don’t know if I believe them.

“Trade has  been  slow  the  past couple of months but has picked up in recent  weeks. I think it will drop off again before Christmas, though, so I will just be waiting to see if it gets any better in the New Year.”

In Wales the outlook was similar. “Prices have been going down on a weekly basis and now they are on the floor,” said one merchant. “People will hold on to it at these prices and I don’t see any movement upwards, not until the New Year. Some [yards] will go out of business.”

Merchants in Scotland were not reporting large decreases in prices in November, but were still seeing a negative impact on trade from the down- ward trend of the past few weeks.

One trader said: “There was no significant movement in November. This month, I don’t know. Everyone is being very cautious and not wanting to put their head above the parapet. Trade generally picks up before the holiday, and we hope it will again this year. But everyone is so cautious – people might just sit on it [the scrap] and hope prices are better next year.”

In the south, there were mixed experiences, with some merchants reporting relatively healthy business despite a fall in prices.

One said: “Ferrous has gone down twice this month, between £10 and £20 overall, once at the beginning of the month and this week. Trading in general is good, though, and scrap is still coming in, so we’re doing OK.”

Merchants across the UK were hoping that prices and trade would pick up in January, but most were resigned to the subdued market continuing.

“Prices have gone down and there is no indication of them going up,” said one operator in the north-east. “Next year the bad weather in January and February usually puts a dampener on things,  so it might  not be until  next Easter  that  anything might  start  to pick up.”

But one exporting merchant concluded that the UK was suffering the repercussions of wider global economic difficulties, and that hopes of any recovery in the ferrous trade  in the shorter term were unrealistic.

“There will be no recovery in January and it won’t do so until the summer, if not even later,” he predicted. “There’s an over-supply of product, the economy has dried up, China is importing from the US and it’s very tough to sell some categories at the moment.”

MRW spoke to 12 merchants for this report

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