Monday, September 08, 2008

Steel producers' shares fall as scrap prices tumble

From CNN in the US:-

Shares of steel producers fell Monday after an analyst said declining prices for scrap metal, an important feedstock for many companies, may force producers to cut their prices.

Soleil Securities Group analyst Charles Bradford, citing steel scrap price data from the weekly American Metal Market, said the trade publication's data may seriously understate the extent of falling scrap prices.

Bradford said some steelmakers have a surcharge system that changes their steel prices as the price of steel scrap changes. This is largely geared to prime scrap grades that have fallen more than $300 per ton during the last week, to $550 a ton.

"It will be interesting to see if the mills drop their prices as fast as they raised their prices when scrap prices soared. We believe that the steel stock prices will follow steel prices, although lower scrap costs help company profit margins and will eventually offset the reduced revenues."

In line with US scrap prices, UK scrap prices have fallen over £120 in the past few weeks, and as the steel producers were always quick to quote scrap as a cost element that forced them to increase prices we eagerly wait the price reduction that should follow :-)

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