Reuters reported that scrap metal generation is expected to fall significantly this year, driving up prices for the material next year. The value of scrap steel rose from USD 100 a tonne in November 2008 to about USD 230 a tonne in November 2009, while shredded scrap currently goes for USD 258 a tonne compared with the July 2008 market high of USD 594 a tonne.
The foreseen shortage in scrap metal is caused by consumers holding back from discarding cars and other household goods that make up 80% of supply.
Sims Metal Management's UK branch is anticipating a decline of 79 million tonnes of scrap metal consumption in 2009. Louis Padnos Iron & Metal's Mitchell Padnos expects a harsh winter in the northern hemisphere to further dampen the supply of scrap metal because of the difficulties of transporting the material under such conditions.
Mr Michael Shillaker analyst at Credit Suisse said that "Due to increasing steel output we will see more scrap demand coming in. Supply side will improve as well, but it will be several million tonnes of more scrap coming in versus tens of millions of demand due to production startups."
He added that "Here in the Midwest, we have no snow on the ground yet, but when it does hit here, it will hit hard and that will slow down the raw material coming into the scrap yards, and that will keep supplies tight."