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| Global steel mini mills called for more usage of ferrous scrap - 04 Oct, 2011 | ||
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Nearly universal in scope, the global scrap supply arises from a vast network of collectors, dismantlers and processors both large and small in every country in practically every state, province, district and county on the planet. Millions of tonnes are shipped around the world each year. The ultra modern mini mill heralded for its operational agility in that it produces steel without resorting to conventional raw materials such as iron ore, coke and limestone could not operate without scrap. It should come as no surprise that the global proliferation of steel mini mills has made ferrous scrap a lucrative commodity. For decades prices for top grades rarely went above USD 130 per short ton in the US and international markets. At times prices fell as low as the USD 60 per tonne range. In late 2001 average prices were USD 80 or less. As with many commodity prices over the past decade, however, ferrous scrap prices began to climb well above historical norms. By 2004 top scrap grades hit a previously unheard of level of USD 350. They eventually reached more than USD 600. Steel mills everywhere were producing at full capacity. Prices plummeted in 2008-09, of course, but they never fell to their historic levels. Today prices are still above USD 400 per tonne, even with US steel mills operating at little more than 75% of capacity. Analysts have periodically issued forecasts to the effect that scrap prices can be expected to rise for an extended period as demand continues to rise while supply remains more or less static. When talking of scrap grades, however, there can be huge variations in content and quality between one scrap pile and another between one supplier and another. Think about the entire galaxy of iron and steel products out there. That’s how many different types of ferrous scrap there are each with its own unique (or peculiar) qualities. Some require special processing before they can be used. Others have contaminants that cause difficulties during processing or in the steel mill, or both. Some grades can be used to make certain types of steel but not others. Some grades need to be segregated from other grades. Occasionally ferrous scrap has been found to be radioactive and cannot be used at all. Because it is so difficult to ensure exactly what is in any given railcar or shipload of say, No 1 shred (shredded steel) or an 80-20 mix of No 1 and No 2 heavy melting scrap, the commodity has generally not lent itself to being an exchange traded product. After all, it took the London Metal Exchange 130 years to get around to listing a steel contract, and finished steel is a much more uniform and widely sold product that steel scrap. A few exchanges, including at least two in Asia, have nevertheless listed ferrous scrap contracts in recent years. The most recent has been the Nymex division of the Chicago based CME, which in mid April began listing a swaps contract for HMS 80/20 ferrous scrap (CFR Turkey). Whether any of these contracts have or will attract much liquidity remains to be seen. (Sourced from www.resourceinvestor.com) | ||
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