Renewed strength

Recycling Today, Oct, 2005

The rapid slide of ferrous scrap prices that marked the late spring and early summer months has begun to reverse itself as summer turns to fall.

Shippers of ferrous scrap enjoyed a healthy increase in mill and foundry prices paid for their scrap in August.

As August turned to September, speculation began to center on the effects of the Hurricane Katrina cleanup on the flow and price of ferrous scrap. The amount of scrap to be generated from the areas severely damaged by Hurricane Katrina could prove to be unprecedented.

As of mid-September serious cleanup efforts were just getting started in storm-damaged communities other than New Orleans, as search and rescue efforts gave way to settling insurance claims and FEMA assessments of federal disaster areas.

Damaged structures in the affected Mississippi, Louisiana and Alabama cities and towns are likely to yield significant metal roofing and siding scrap. Appliances, totaled vehicles and other sources of scrap are also likely to be identified and separated as recyclable by cleanup crews and mobile baling crews who will be on the scene.

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Beyond this significant new tonnage hitting the Gulf Coast market this fall, speculation also centers on the percentage of structures that were fully or partially submerged in New Orleans' floodwaters that will be deemed uninhabitable and that will face demolition. Whether occupants of commercial structures will choose to disinfect and clean up their buildings or to demolish and rebuild will affect scrap flow.

Flooded southern Louisiana will likely yield totaled vehicles and damaged appliances as shredder feedstock, in addition to the sizable amounts of demolition scrap.

Another source of speculation concerns how soon orders for new steel in the Gulf Coast region will spark additional demand for this unplanned scrap source. Before Katrina, steel industry statistics showed a decline in once heavy inventory levels at steel service centers and mill shipping docks. If structural steel, sheet steel and reinforcing bar from Gulf Coast rebuilding projects are ordered this fall, it could cause a counterbalance in steel demand at the same time Katrina-related scrap is hitting the market.

Many market watchers are not convinced that the supply and demand factors will line up smoothly. Some scrap veterans say a glut of supply will drive down scrap pricing before a subsequent demand for steel products stemming from Gulf Coast rebuilding can balance out the market.

(Additional news about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)