In our September 11, 2014 Strategic Insights, WSD said it was only a matter of time before the price of steel scrap would decline as much as 10-15 percent ; and it has.
Based on WSD's SteelBenchmarkerTM pricing series, shredded steel scrap delivered to US mills was $376 per gross ton in August 2014 and $360 per gross ton in August 2013. In early December 2014, it was $326 per gross ton. The current price is about 30 percent below the post-2008 financial crisis high of $466 per ton in January 2012. By way of comparison, the prices of iron ore and coking coal are down far more sharply:
• The current iron ore spot price, delivered to China, at about $68 per tonne is off about 52 percent from $143 per tonne in early August 2013; and, it is down about 64 percent versus its temporary peak of $191 per tonne in the winter of 2011.
• The price of coking coal, FOB Australia, at about $111 per tonne is off about 22 percent from $142 per tonne in early August 2013 and about 69 percent versus the peak of $355 per tonne in 2011 (when heavy rains in northeastern Australia wreaked havoc on the region and created a global shortage).
As indicated in the graphic, given mid-December prices for iron ore and coking coal, the price of steel scrap appears to be perhaps $50 per tonne overpriced on a value-in-use basis. This disparity would widen if the scrap price is unchanged and the iron ore price, as we expect, declines about $10 per tonne in 2015.
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