A Brief Pause

Ferrous scrap buyers were able to buy shredded and heavy melting steel (HMS) grades for several dollars per ton less in early May, but as the month ended the two-month pause in pricing seemed about to end.

In the early May buying period, mill buyers were successful in obtaining shredded scrap for about $20 less per ton compared to April, according to the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh.

While shredded scrap pricing lost $18 per ton in value in May and No. 1 HMS prices dropped $14, prompt grades held their value, dropping just $4 per ton on average nationally.

By mid-May, recyclers were reporting two factors likely to cause prices to revive again as mills made their June purchases: flooding hampering barge traffic on the inland waterway system and renewed interest from exporters when prices dipped in April and May.

Delegates attending the Ferrous Division Meeting at the 2011 Bureau of International Recycling (BIR) World Recycling Congress heard mostly positive things about the health of the steel and ferrous scrap industries.

Among those offering reports at the late May event was Blake Kelley of Sims Group Global Trade Corp., New York, who noted that scrap prices in North America declined in early May but were rebounding as the month ended.

“There are significant transportation problems both on the inland river system due to severe flooding and high water conditions, while the railroad system is struggling to perform as a result of a fully utilized railcar fleet,” Kelley remarked regarding supply constraints. “Difficulty with both transportation modes is frustrating dealer efforts to complete [delivery] commitments.”

On the demand side, Kelley noted that mills in the United States are running at about 73 percent capacity, with flat-rolled steel in greater demand than long products.

With more mills back in production and the construction sector still lagging, some forms of steel may be in oversupply. “There is concern that supply has exceeded demand, and in fact domestic hot-rolled coil prices have already begun weakening and now stand at about $900 per metric ton ex-works,” said Kelley. “According to recent news reports, Nucor cut its rebar price to $755 per metric ton ex-works in response to limited construction activity and increased imports.”

While some imported steel is arriving into the United States, the weak U.S. dollar may also be helping exporters. “Service center inventories in April were 2.4 months sales, which is considered a reasonable and healthy level [and] United States steel exports in March were up 19 percent to 1 million metric tons,” Kelley remarked.

Scrap export flows are healthy, said Kelley. “China and Korea have been aggressively buying and consuming raw materials,” he said. “China reportedly purchased many bulk cargoes with shredded pricing around $480 C&F (cost and freight); South Korea has also purchased many cargoes with heavy melting steel (HMS) prices flat in the mid-$470s C&F.”

He noted that the world’s steelmakers are on pace to produce 1.54 billion metric tons of steel in 2011, a figure that is some 111 million metric tons higher than the 2010 output. “An increase of this magnitude in steel production, and its corresponding increase in raw materials consumption, has made for an interesting beginning to the year,” said Kelley, adding that the world’s steelmakers at this pace will consume some 48 million metric tons of additional scrap compared to 2010. “Seemingly, there is enough supply to cover that amount of demand.”

Reporting from the European perspective, Thomas Bird of Van Dalen U.K. Limited, Stratford-Upon-Avon, England, remarked that the ferrous market in Europe has enjoyed “bullish sentiment” at times in the first half of 2011, but also has “stuttered somewhat” on occasion in reaction to world events.

Most recently, a “view of a weaker market in May did not materialize,” Bird commented. “Considerable volumes of tonnage were bought at the end of April and early May,” he continued. “Prices for HMS increased to the high $460s
and rebar levels for Turkish finished product were $710 at time of writing [this presentation].

“May saw healthy demand across the European Union, with [inventories] at mills running at relatively low levels,” said Bird. “Finished product demand remains healthy and we are expecting demand for scrap to remain strong for the immediate future.”

The 2011 BIR World Recycling Congress was May 23-25 at the Shangri-La Hotel in Singapore.
 (Additional information on ferrous scrap, including breaking news and consuming industry reports, can be found at www.recyclingtoday.com.)