Ferrous merchants are preparing for a further fall in prices for this month after another drop in August prompted some of the lowest prices in years.
Most merchants that MRW spoke to reported price decreases of up to £15 per tonne on average across the different categories in August. Several were paying as little as £30 per tonne for light iron, with at least one paying £20 per tonne, while for others it was not worth offering payment at all for the category.
The price falls in August came amid a general slowdown in trade for most operators during the summer holidays, although some reported an upturn in trade as some took the break as an opportunity to clear out premises and get rid of scrap. However, the trend during the past few months has been one of slow business.
One trader in the Midlands said that prices had come down between £10 and £15 per tonne in August, and that it was hard to feel any positivity about the ferrous scrap sector.
“We are paying £30 per tonne for light iron but I would rather not pay [anything] for it,” the merchant said. “OA will get £70 if it’s good. Trade is very quiet, and it’s hard not to feel that everything is doom and gloom. I’ve heard that prices are going to come off again this month.”
In the south things were not much better, with price falls of up to £15 reported, along with slow trade.
One merchant reported a dip in prices and trade but said that, although things were bad, the sector was not charting unknown territory and he was determined to remain optimistic.
“Prices have gone down every Wednesday for the past three weeks,” he said. “We are £20 for light iron. It’s low but we have been here before, so let’s see what happens.”
Merchants in the north-west, Scotland and Wales saw similar drops to other regions. A lack of supply was an issue cited by several merchants. One said that slow trade was having a wider impact on the business.
“There is nothing coming in and it is really quiet,” he said. “We are trying to sell off some of the machinery because we’re downsizing, but we’re not getting a lot of interest. We will be moving later than expected now, and that is costing us more in overheads.”
Several merchants were steeling themselves for further decreases this month as UK ferrous scrap continued to struggle to look as attractive. Lower priced Chinese iron ore and currency fluctuations are making life difficult for exporters, which was affecting demand for scrap across the UK more generally.
“There have been two drops of £5 in August,” one merchant in the Midlands said. “Trade has been off and on during the holiday period and now, with lower prices, people are shopping around or hanging on to metal. Maybe when the children are back at school, we might see people start to bring more stuff in and things will pick up again, but I don’t know.
“Chinese steel is more attractive, especially with the devaluation of the currency. No-one wants UK scrap any more.”
Another merchant commented: “The fall in prices has sounded the death knell on buying cars – we are buying 70% fewer. We can’t compete with the breakers and there are still some businesses doing it unlicensed.”
As MRW went to press, one large operator anticipated that prices would come down by between £10 and £15 in September when the mills settled prices. Most merchants expected the same, with not much improvement in trade in the coming weeks.
One trader in the Midlands thought that price decreases would not be as large as some expected, and they would not go much lower before the end of the year: “There are rumours that prices will come down another £15, but I think there will be another £10 off between now and Christmas.”
A couple of merchants that MRW spoke to felt that the increasing pressure on prices and margins was fast reaching a point where it would be too much for less robust or younger businesses to cope.
An operator in the north-west said it was now paying between £30 and £40 per tonne for light iron.
“That’s the lowest for a long time,” said the merchant. “Business is dead because iron ore is still cheap. We are just keeping our head down. But it will be difficult for others: there are repayments to make and overheads. There will be some casualties if things keep going like this.
“I’ve heard another £5 to £10 is coming off this month.”
MRW spoke to 11 merchants for this report