Commodity Report Ferrous

A LITTLE BACKPEDALING Steel mill buyers of ferrous scrap on the spot market paid about $25 less per ton for material in the October buying period, according to transaction pricing compiled by Management Science Associates Inc. (MSA) for its Raw Material Data Aggregation Service (RMDAS). Buyers of prompt grades paid $316 per ton on average, down by $23 per ton compared with the average price of $339 paid in September. Likewise, pricing was down comparably for shredded scrap and No. 1 heavy melting steel, with shredded taking the biggest plunge of some $29 per ton as a national average on the spot market. The October price slide marked the end of an upward pricing trend that had run through July, August and September.

The pricing drops in October were fairly uniform across all three RMDAS regions, with the largest drop ($33 per ton) indicated for shredded scrap in the North Midwest, and the smallest move ($21 per ton) seen for prompt grades in the North Central/East (defined by RMDAS as the New England states plus, New York, New Jersey, Ohio, Pennsylvania, Kentucky, Maryland, eastern Virginia, West Virginia, most of Indiana and most of Michigan).
Export demand is considered to have driven much of the upward price movement in the previous three-month period, and recyclers are pointing to some hiccups in that demand as the reason for the October price drop.
In particular, scrap buying and overall manufacturing activity in China was scaled back by two major holidays that fell within three days of each other in that nation. With National Day on Oct. 1 and Mid-Autumn Festival Day falling on Oct. 3, many individuals took much of early October away from work and many industrial businesses scaled back or shut down for a time.

Recyclers say the drop-off in export demand was noticeable as soon as the October buying period began. As of the third week in October, ferrous scrap recyclers contacted are predicting that there will not be a pricing rebound in November, as export demand remains weak compared to earlier this year.

Steel producers in the United States have helped to jump in to pick up some of the export slack, but the domestic steel industry rebound is slow. Judging by steel production rates calculated by the American Iron and Steel Institute (AISI), however, domestic steelmakers continued to pick up their pace of production in October.

According to AISI, in the week ending Oct. 17, 2009, domestic raw steel production was 1.47 million net tons for a capability utilization rate of 61.7 percent. Production for that week was up 1.9 percent from the previous week, when production was 1.45 million tons and the utilization rate was 60.6 percent.

	Total US	North Central / East	North Midwest	South
Prompt Industrial Composit	$316	$320	$299	$303
#1 HMS	$245	$244	$244	$247
#2 Shredded Scrap	$265	$267	$258	$267
#2 Shredded/Change vs. Month Before	-$29	-$26	-$33	-$31
After three months of price gains, ferrous scrap sellers settled for less in October, making sales at from $21 to $33 per ton less on the spot market. Reported regional aggregated spot market prices per gross ton shown for each commodity are based on all Management Science Associates’ (MSA), Pittsburgh, Raw Material Data Aggregation Service (RMDAS) participants’ actual order data submitted to and processed by MSA as of the 20th of each respective “buy month,” rounded to the whole integer. A map of RMDAS regions is available at http://rmdas.msa.com, as is a further explanation of RMDAS methodology and an accompanying disclaimer. No. 2 shredded scrap is defined as containing .17 percent or greater copper content. The prompt industrial composite consists of an average of No. 1 bundles, No. 1 busheling and No. 1 factory bundles. Additional pricing information on each grade can be found at www.RecyclingToday.com. © 2009 Management Science Associates Inc. All rights reserved RMDAS is a trademark of Management Science Associates Inc.

Those weekly figures are still down from last year (production was 1.68 million tons in the week ending Oct. 17, 2008, while the capability utilization rate then was 70.5 percent), but upward momentum continues.
Scrap recyclers are hopeful that export brokers will increase their activity during the November buying period, while the slow improvement in the domestic market continues.

On the generation side of the equation, the “cash-for-clunkers” program generated auto bodies for some shredder operators, but the flow was not even at all locations.

An auto shredder operator in Ohio says he successfully established ties with a number of auto dealerships in his market region to procure end-of-life vehicles directly from them. The result was a welcome infusion of several truck loads of vehicles.

Some shredder operators worked in tandem with long-time auto salvage customers, allowing them to harvest the non-drive train components before the vehicles went to the shredder yard.
Other shredder operators, however, have reported seeing very little incoming feedstock that they can tie directly to the cash-for-clunkers program.

The flow of demolition scrap remains volatile and varies by market region. A scrap recycler in the Great Lakes region says the flow of demolition scrap into his facility has been good throughout the late summer and early fall.
A recycler in the Pacific Northwest, however, says “fluctuation” is the key word. “We see horrendous swings month-to-month,” he says, even estimating that there can be 50 to 100 percent swings in demolition scrap volume from week to week.

On the operations side, he says while recyclers may at times in 2009 have felt their processing capacity was now too great, “If you have surge capacity to take advantage of those [volume] swings, at least you’re in a position to handle them.”

(Additional news about ferrous scrap, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)