The ferrous scrap market witnessed a historic month in February. It would be hard to imagine a worse month for the industry, as tags fell as much as $120/GT for premium grades (busheling, bundles) and up to $90/GT for shredded steel and cut grades. The collapse further weakened a market that witnessed approximately $60/GT drops across all ferrous categories in the final three months of 2014. Pricing for prime grades have now fallen $190/GT over the past year and around $170/GT for the cut grades.
Ferrous prices in February reached levels last seen in the dark days of 2008. Several factors contributed to this collapse. The lack of export markets for US scrap continues to create a glut of material. The strength of the dollar is also a major factor, as foreign dealers pushed their material into the US. February also witnessed a 12-year low in iron ore prices.
Scrap dealers also exacerbated the problem by holding substantial amounts of material in their yards late last year in anticipation of the traditional price increases in January and February. These factors colluded to produce a perfect storm for a market collapse.
The price degradation has largely eased in March. Most grades in the Southeast stayed sideways or witnessed slight dips. On the heels of a catastrophic February, this can be viewed as a small victory.
Pricing in the Midwest continued to slide, with prime grades dropping a further $15-20/GT and cut grades losing $5-10.
Industry players expect the market to remain depressed in the short term as all of the factors mentioned above continue to define the market.