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Market Focus: Ferrous metals

Ferrous metals

Many ferrous scrap merchants have been left reeling as weeks of upward price movements have been reversed by a steep drop during the past month.

Merchants across the UK reported average price falls of between £20 and £30 per tonne, with some categories in some regions dropping £45 or more. The price drops in ferrous metals have come out of the blue for some who had been hoping that recent weeks of small increases were signs that the sluggish sector was turning a corner.

Several merchants that MRW spoke to blamed the price falls on the end of a run of large orders and imports, while others were as unable to explain the drops as they had been unable to understand the earlier price increases.

One merchant in the Midlands said that prices had come down on average £25-£30 per tonne, with some grades down £40.

“I’m not sure I’d want to take light iron because you don’t know if it is going to come down again,” he said. “I suppose £35-£40 is the most I’d pay. Heavy would be £60 or £70 at a push, and £80 for cuttings.”

The story was similar in the northeast, with one operator reporting prices coming off £20-£30 on average across the categories: “Most of the Far East countries are on holiday and there is still cheap steel being dropped in other countries.”

In the north-west, one merchant said that prices had gone down around £50 per tonne in the last month or so. “I’ve heard that Chinese billet has dropped in price and it’s an alternative to scrap, so the scrap has to come down to match it,” he said.

Another trader in the region reported a £30 per tonne drop: “I’ve heard it’s a lack of orders. They’ve been completed and there is nothing to replace it. Trade is very quiet, the quietest I’ve known.”

In the north-east, one merchant saidthe price fall made sense. “It was silly for it to go up in the first place,” he said. “The sector is all doom and gloom so why did it go up – there was no real reason?”

A trader in the Midlands, who was paying just over £40 at most for light iron and £65 for heavy, said that prices were “back to square one” after having come down around £20 per tonne on average.

“They should have left prices where they were because the scrap would have come in anyway,” he said. “We’d just got over people whinging and they were happy, and now they are going to start whinging again.

“The referendum uncertainty has affected currencies, which makes UK scrap less attractive and more expensive, and it’s hard enough to sell it in the first place.”

Another merchant in the region was one of several who said that previous price increases and the subsequent drop were due to a short-term run of big orders coming to an end, while another said there had been various explanations.

“I’ve heard the drop is because of everything from the export market, monsoons, Ramadan and the state of UK mills,” the merchant said. “Hopefully this is the bottom or there won’t be any trade. No-one is going to come out for £15 for some light iron, are they?”

Operators in Wales experienced a series of price drops in the past month and were left wondering how much further there was to go.

One commented: “We expect a downturn before the holidays, but this is early and out of the blue. We’re not at the very lowest at the moment. You’ve got to carry on. You can still make a profit if you can get the material, but we only got our first load of the week in this morning.”

Price falls reported by merchants that MRW spoke to in the south were a little less pronounced than other regions, but several were expecting more of the same in future weeks.

“Prices have gone down £5-£10 per tonne on average,” one operator said. “Light iron is £40 and heavy is £55, with cuttings £60. I’ve got no idea why. Rumour has it that they will go down again this month.”

While most traders were unable to predict where prices would go in the coming weeks, some said they were expecting reductions of another £10 or £15.

In Scotland, merchants were reporting drops of between £15 and £40 per tonne across various categories and they were also cautious about forthcoming weeks. “There is no demand and I think it will go down again this month,” said one. “Trade is fairly slow, worse than usual – there are not many people wanting to use scrap at the moment.”

Another said that the export market was particularly slow: “The rest of June is very unclear – I’m being very cautious about buying stuff at the moment.”

MRW spoke to 17 merchants for this report

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