Even Scrap Buyers Are Fighting For Survival!!!

The following news clip caught my attention. Yes, it's yet another horror story!

• Buyers cancel orders as scrap steel prices fall
  Prices of ferrous scrap tumbled at least 80% in the past four months, but demand is expected to recover next year
  
  Beijing: Scrap steel buyers in Asia are cancelling orders after prices tumbled at least 80% in the past four months as demand slumps, traders said.
  
  “There are buyers in China, India and Europe that are literally fighting for their survival,” said Bob Garino, director of commodities at the Institute of Scrap Recycling Industries Inc., a trade association representing at least 1,600 companies. “Steel prices have fallen off a cliff, and they just don’t have the money to honour their contracts.”
  
  Sims Group Ltd, the world’s biggest recycler of scrap metal, said in October sales may fall and it may write down inventories. Steel makers in China, Japan, India and Korea, which account for more than 50% of global output, are slashing production as the global economic slowdown curbs demand from builders and car makers.
  
  Prices fell to $120 (Rs5,664) a tonne this month, from $730 a tonne in July, said Jeff Allman, managing director of ferrous trading at St. Louis-based Kataman Metals Inc., which does more than $1 billion in scrap trades a year.
  
  Scrap iron and steel prices in Japan slumped 22% to 14,076 yen ($141) a tonne in the week ended 27 October, according to the Japan Ferrous Raw Materials Association. That’s the lowest in at least three years. Prices in Korea dropped 27% in August from July, Citigroup Inc. said on 7 October.
  
  Surplus ferrous scrap is sitting in yards, ports and on ships as contracts are renegotiated, said Kataman Metals’ Allman.
  
  Profit margins have dropped to at most $20 a tonne, from as much as $200 a tonne previously, he added.
  
  In Thailand, which imports 2mt of ferrous scrap a year, 800,000 tonnes of the material is without buyers, said Suppakit Varnapurna, steel scrap manager at SCT, the trading affiliate of Siam Cement Pcl., the country’s biggest cement maker.
  
  Pramod Kumar Saraf, director of Chennai-based scrap buyer Jai Bhawani Steel Enterprises Ltd, agreed to share losses with a seller on a 2,000 tonne shipment by halving the agreed price to $250 a tonne.
  
  “Sellers are desperate,” Saraf said in an interview in Shanghai. “We have compromised too.”
  
  China, the world’s largest steel maker, will probably post a 20% output decline in the fourth quarter, the Central Iron and Steel Institute said earlier this week. Japanese mills are cutting production by the most in at least five years, the nation’s trade ministry had said on 29 October.
  
  Worldwide annual production of ferrous scrap is about 330mt a year, according to the Institute of Scrap Recycling’s Garino.
  
  Scrap from discarded cars, machinery and beams in developed economies is recycled into steel in so-called electric arc furnaces. Conventional blast furnaces use iron ore and coal to make steel.
  
  Still, China and West Asia will continue to consume large amounts of steel for urbanization and infrastructure, helping demand for ferrous scrap to recover as early as the first quarter of 2009, Kataman Metals’ Allman said.
  
  Falling copper prices have also led buyers to cancel purchases, said John Chen, executive vice-president of Tung Tai Group, a San Jose, California-based scrap metal trader that also owns processing yards in China.

Source: http://www.livemint.com/2008/11/06001517/Buyers-cancel-orders-as-scrap.html