A summer hot spell

A ferrous scrap market that has been steady throughout most of 2017 experienced some boosts in pricing in the early August buying period, sparked not only by steady domestic mill buying but also by increased overseas interest.

The Midwest pricing indices formulated by American Metal Market (AMM) showed price increases in the $10-per-ton range in August, but the real volatility occurred in export transactions.

Purchases off the Pacific Coast in August resulted in a nearly $50-per-ton price increase for exporters in California, while buyers representing mills in Turkey helped boost Atlantic Coast shipments by an average of nearly $35 per ton, according to AMM.

The steel industry in the U.S. has played its role in the 2017 ferrous market with steadily growing output. Figures from the American Iron and Steel Institute (AISI), Washington, show that through Aug. 5, 2017, domestic output has been 53.8 million tons at a mill capacity rate of 74.5 percent. That represents a 2.7 percent boost in production from the 52.4 million tons of steel produced during the same time frame in 2016, when the mill capacity rate was 72.4 percent.

The trend has been for output to rise through most of 2017. In the week ending Aug. 5, 2017, domestic steel production was 1.76 million tons, while mills operated at a capacity rate of 75.6 percent. That 75.6 percent capacity rate helped boost the year-to-date average.

Those weekly figures also compare favorably with output of 1.66 million tons in the first week of August in 2016, when the mill capacity rate was 70.9 percent (representing a 6.3 percent increase in production year against year).

On the supply side, a recycler in the Midwest says overall his second quarter “was a little softer” compared with the first quarter. In the tried and true fashion, however, as scale prices were rising in August, he says, “Material seems to be coming out of the woodwork, as usual.”

Wider industry and economic trends could yet spoil the 2017 party, including several steel and ferrous scrap industry conditions pertaining to activities in China.

To what extent China will become a net exporter of ferrous scrap is not a subject of complete agreement in the sector. (See the cover story, “Scrap tsunami warning?” starting on page 36.)

India-based journalist V.K. Shrivastava says Chinese scrap was marketed to mill buyers in neighboring nations, such as South Korea and Taiwan, in the spring of 2017, in what could mark a shift from China as a net importer to a net exporter of ferrous scrap.

The near-term prospects for China’s steel industry remain critical to scrap pricing for supply and demand reasons. If China’s steel sector slows, it would not only consume less scrap but likely would speed up China’s status as a scrap exporter.

Various Chinese ministries have long made statements of concern pertaining to overcapacity in the steel industry, and reports from China indicate many smaller, scrap-fed induction furnace mills have been shut down in 2017.

Statistics from within China, however, do not point to cutbacks in overall steel output in that nation. Reuters reported in mid-August that China’s own statistics bureau recorded 74 million metric tons of steel output in July 2017, the second consecutive month the nation has posted a new monthly record.

Industry analysts reached by Reuters said the shutdown of the induction furnace mills might have had the unintended consequence of remaining steelmakers stepping into the breach to produce more rebar and other types of steel made by the idled mills.

In the Western Hemisphere, Mexico and Brazil, the two largest volume steelmakers in Latin America, each posted double-digit percentage steel output gains in the first half of 2017.

Figures collected and distributed by the Brussels-based World Steel Association (WorldSteel) show that while the U.S. managed just a 1.3 percent rise in output in the first half of 2017 compared with 2016, Mexico’s output climbed by 11.2 percent, and Brazil’s production by 12.4 percent.

Brazil produced more than 16.7 million metric tons of steel from January through June 2017, up by nearly 2 million tons (12.4 percent) compared with the first half of 2016. In Mexico, meanwhile, first-half 2017 output of 10 million metric tons represented an 11 percent increase compared with the 900,000 metric tons produced in the first six months of 2016.

Argentina, Latin America’s third-largest steelmaking nation, also boosted its output beyond the 1.3 percent rise of the U.S., though its 3.2 percent gain in output did not come close to matching Brazil or Mexico’s double-digit gains.

According to an analysis posted on the Hellenic Shipping News website, the growth in steel output in Brazil and Mexico occurred despite Latin America importing 13 percent more Chinese steel by volume in the first half of 2017 compared with the first six months of 2016.

Additional RMDAS (Raw Material Data Aggregation Service) pricing from Pittsburgh-based Management Science Associates (MSA) is available on the Recycling Today website at www.RecyclingToday.com/RMDAS.

The American Metal Market (AMM) Midwest Ferrous Scrap Index is calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The AMM Scrap Index includes material that will be delivered within 30 days to the mill. Spot business included after the 10th of the month will not be included. The AMM Ferrous Scrap Export Indices are calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The detailed methodology is available at www.amm.com/pricing/methodology. *FOB New York, in metric tons; **FOB Los Angeles, in metric tons.