I recently wrote an article about why the price of scrap has risen when the demand for steel continues to languish. I offered my take on it and asked others to offer theirs. Well, it seems World Steel Dynamics has responded (ok, so they were probably just responding to a multitude of people asking the same question so shoot me) by asserting most of what I stated and adding additional insight.  We may have to take a closer look at how we go after scrap.

According to an article in Recycling Today, the World Steel Association is forecasting growth in the global steel industry of 9.2 percent, resulting in production of 1.206 billion tons of steel. In the US, they are forecasting a growth rate of 18.8 percent. From a US steel distributor’s perspective, that seems like quite a leap.

All across the US, demand appears to be weakening as construction and manufacturing contract in the face of the annual winter slowdown. Across the northwestern US, many fabrication shops are only seeing a 2-3 month backlog of orders, with very little coming on the horizon.  So if the forecasts are even close, the second half of 2010 would need to be pretty good. I guess we’ll see what happens but as positive a person as I am, it seems like quite a stretch to me.

I hope that somehow the forecasts come close. Not only will it affect our steel revenue but probably even more, our scrap revenue. As steel demand heats up, so will scrap demand, which is still experiencing a shortage here in the US. That shortage will likely cause price increases, which bodes well for scrappers as long as we don’t experience a fall-off similar to last year. Either way, I think we are in for an interesting ride.

So, do you see something different than me? Any positive news you have heard that would have long-term consequences?

With all the bad economic news adding to our woes almost daily, we find ourselves grasping at any sign that things could be on the mend. When I first read this along with some other comments, my feet wanted to get up and do a little jig. I actually had to sit down and do some analysis in my head.

“Now wait just a minute,” I told myself. “This is just a small indicator and it’s in a country far away. Even if it is the beginning of price stabilization, it is in Great Britain and will take some time before being felt over here. And, the commodities that concern out company the most are metals and those are still floating near the bottom – except some precious metals which have gained recently.”

So, yes, the news about some items realizing significant price gains is good, however, it is just a small piece of the pie and it is in a market far away from us. Sit back down, take a few deep breaths and get back to work.

Even though steel production was down in November, scrap iron prices actually went up in December. From the reports I have read, it appears US steel mills will take some additional time off here at the end of the year, which should push prouction down even further. Which leads to the question of what caused the upswing? Recycling Today didn’t have an answer – do you? Whatever the reason, here’s hoping that it is a trend that will continue, especially as the steel mills resume production in January.