Harris: “Scrap is the Bellwether for Global Steel Prices”

Scrap prices are heading down and could dip below the $200/GT mark as the gap between scrap supplies and demand continues to widen. With mill operating rates declining under 80 percent and scrap export markets dropping drastically, expect steel prices to follow suit, said scrap consultant John Harris, CEO of Aaristic Services.

Scrap is the bellwether for global steel prices, though it now takes its lead from China (which accounts for more than half of global steel production), as opposed to Turkey. First, the Chinese sell their excess scrap totaling 15 to 20 percent of production into the international marketplace. This surplus exists because 90 percent of their steel is produced in integrated mills. China’s steel production, coupled with perpetual expansion, continues to exceed the nation’s steel demand by more than 10 percent. Trade disputes with the U.S. and other countries compound the situation, and China must export even more steel and scrap to avoid plant shutdowns, Harris said.