Scrap prices up 20% are sign of life for steel

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The scrap value of an old car has shot up by 20 per cent since January, offering a glimmer of light from the real economy to echo the green shoots in surveys of sentiment.

Scrap metal prices dropped through the floor last autumn as the worldwide recession sent the global steel industry into hasty reverse. The value of a car shell plummeted to just £40, compared with the record high of £250 earlier in the year.

But the recovery has been as steep, and as speedy, as the collapse, according to Cartakeback, a network of 250 authorised scrapping facilities with manufacturer contracts covering more than 70 per cent of the vehicles on UK roads. Graham Price, the director, said: "Scrap tends to be a barometer of economic recovery – it is first into recession because steel is such a basic commodity, and it is first out because it is the raw material you need to make pretty much anything."

The outlook for the European steel market remains grim. Industry group Eurofer is predicting orders at EU steel mills will remain at "unprecedented low levels for the time being" thanks to a 40 per cent slump in demand in the first half of 2009. But there are signs of a pick-up in activity in China on the strength of government stimulus packages.

The UK scrap market is export dominated. And although the number of vehicles going for scrap dipped by 15 per cent in the first quarter as cash-strapped drivers tried to eke as much life as possible from their old bangers, a car shell will now fetch about £125 as the export market has swung back into life. Mr Price said: "In September and October last year the market basically closed – the steel industry didn't receive orders so the shutters went down. But the steel works are now coming back on again."