LONDON, Jan 31 (Reuters) - Strong export demand for ferrous scrap in the United States has taken prices to their highest level since 1999, traders said on Friday.
Scrap suppliers in the U.S. have been swamped with offers from buyers in Asian countries and Turkey in the past two months, which has boosted export and local prices, traders said.
The latest auto industry factory bundles prices, the key price indicator to the U.S. steel scrap market, increased by an average of $10 a long ton this week as steel producers scrambled to bank adequate feed supplies.
The average factory bundles price is now about $144 a long ton - up $20 since December - the highest level for this benchmark grade of steel scrap in more than three years.
"The export demand is driving it," one trader on the East Coast said. "Off the West Coast they're (scrap exporters) sold out through March and off the East they're sold out into early March," he said.
"There's an offer out there from Indonesia for 30,000 tonnes of material and no-one can deliver until April," said one trader. "A shipment was booked from New Orleans last week and that hasn't happened in five years," he added.
Steel scrap is a leading economic indicator in the U.S. since steel mills buy scrap based on their order books, which reflect the order books of the auto, construction, appliance and other major industries.
As exports flood out of the United States, internal scrap prices have risen by about $20 a short ton since December. Steel mills are now paying about $145 a ton delivered for shredded scrap, traders said.
But steel mills have not been able to pass the increase in feed on to their finished steel prices as demand has stayed relatively flat.
Instead, U.S. steel producer Timken Co. last week slapped a scrap surcharge of between $10-$15 a ton on to its steel prices, traders said.
"This kind of thing hasn't happened in years, but we think other steel mills will follow as their (profit) margins are being squeezed," said one trader.
Timken could not be reached for comment.