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Market Focus: Ferrous metals March 2015

Tough times are set to continue for merchants of ferrous metal as prices seem likely to fall again this month. Steel mills are understood be looking to agree prices between £15 and £20 per tonne lower than last month, continuing the market’s downwards trajectory.

Several merchants that MRW contacted said that prices were the lowest they had ever seen, with the rest commenting that they were near the lowest in their experience as scrap metal merchants.

One operator in the south said that trade was “terrible” and there was not much room for prices to fall further.

“We are hearing that prices are going to go down again, up to £25 per tonne, but I don’t know if they’ll agree that,” he said. “Prices haven’t been this low for 15 years. We are paying £30 for light iron. If they put it down again they will be free tipping it.”

In Wales, one merchant said that prices had fallen £15 per tonne on average in February and he feared a similar fall this month.

“Trade is poor because of the low prices,” the merchant said. “There has been no talk of what will happen to them next, and I’m afraid to ask. I don’t want to be pessimistic but it’s not good, is it?”

Prices had stabilised for some Scottish merchants, but at least one was preparing for a price drop, citing a lack of demand as the reason for downward pressure on prices.

“Prices are down and I’m hearing there could be another drop,” he said. “Trade is going very badly, the worst for five or six years. We can’t get a market for material. Nobody is using steel or building anything.”

In the south, price falls had not affected some merchants, who seemed less pessimistic although none reported anything like busy trade.

One trader summed up the mood: “Prices haven’t moved, but trade has been quiet because prices are low that no-one is interested.”

Another expressed a similar sentiment: “There has been no change on prices. It is still quiet but fine. People still need to get rid of material. We’re not too sure about March, but prices now are the lowest they have been for a long time.”

A merchant in the north-west was hopeful, not having heard any concrete news of price changes for March. “Trade is a little better than last year but still not good,” he said. “Maybe prices will roll over.”

However, other businesses cited longer term economic and political issues abroad as drivers for the sustained downturn in the market, especially for exports.

“Prices have come down $100 per tonne since last year,” one Midlands merchant said. “Iron ore prices are continuing to come down. There is too much unrest in the Middle East and north Africa. Ukraine produces a lot of steel and their currency has been devalued, so it is cheaper to go elsewhere [than the UK].”

Another operator also reported that the non-domestic market was making business very difficult.

“It’s because Chinese demand is non-existent,” said the merchant. “They are making cheap steel and have cheap ore, so it is cheaper to import that than to buy scrap from here where you have to clean it and transport it.”

The merchant said his business was preparing for price falls in March of up to £30 per tonne, creating prices significantly lower than 12 months previously.

“This time last year, we were paying £100 per tonne for light iron but now it’s £50, and £200 for heavy but now it’s £80, less than half,” the merchant said.

One operator told MRW he had heard of some businesses resorting to drastic measures to get material.

“There are bidding wars now, and even people offering contracts like one for a mobile phone – guaranteeing to pay over the market price for six months to tempt customers,” the merchant said. “It’s madness – I can’t see how the numbers can add up.”

Most merchants that MRW spoke seemed resigned to the current trend in levels of trade for at least the first half of this year, if not longer. At least one merchant was also frustrated by the failure of some operators to abide by the ban on cash transactions, and had decided to close their operations.

“There is no business,” the merchant said. “Some are still paying cash. I’m in my sixties and I’m not turning into a criminal now just to keep the company going.”

One north-east operator summed up the general sentiment: “Trade has been hit and miss but overall very quiet. I think the industry is going to have to change somehow because it is going to be a long haul before anything gets better.”  

MRW spoke to 14 merchants for this report

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