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According to just-published data from American Metal Market (AMM), June prices for shredded scrap (obsolete) tumbled $58 (or 13.5%) to $372/ton, and #1 busheling (prime) scrap plunged $65 (or 14.6%) to $380/ton.

The sharp declines were the largest one month drops for both grades since November 2008, and put prime scrap at the lowest level since December 2009 and shredded at the lowest since November 2010.  Since peaking in January of this year, prices of prime and obsolete scrap have dropped $140/ton (or 26.9%) and $98/ton (or 20.9%), respectively.

We believe the decline for shredded scrap was driven by the evaporation of the export market for obsolete scrap, lower iron ore prices as well as the general slowdown we are seeing in steel demand and production.  While prime scrap is more insulated from the global market, a step-up in supply due to increased manufacturing and a decline in demand due to weaker sheet markets drove the steep pricing decline in the month.

Our full report provides our scrap and steel price outlook as well as the implications for steel equities.

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