Added Value, but a Drop Expected Next

(Per gross ton for No. 2 shredded scrap, defined as .17 percent or greater copper content)
For the second consecutive month, shippers of ferrous scrap were able to fetch a few dollars more for their ferrous scrap in the September buying period.

According to pricing survey data of the Raw Material Data Aggregation Service (RMDAS), compiled by Management Science Associates (MSA), Pittsburgh, prompt, shredded and No. 1 heavy melting steel (HMS) scrap all gained in value in each of the three regions tracked by RMDAS.

Mill buyers in the North Midwest region (consisting of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin and the northwest corner of Indiana) witnessed the largest gains in September. Shredded scrap increased by $30 per ton in value in this region, followed by a $24 per ton gain for prompt industrial grades (new production scrap consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) and a $23 per ton increase for No. 1 HMS.

Nationally, mills paid an average of $435 per ton for prompt scrap, the most they have paid since June of 2010. Mills paid an average of $370 per ton for shredded scrap, the highest per ton figure since April of 2010.

Pricing was largely consistent across all three regions. The largest swing was the $25 per ton average price difference between what mill buyers paid for No. 1 HMS in the North Central/East region ($351 per ton) and the South region ($326 per ton).

While the price increases are welcome news for recyclers, several of them report that their expectations had been for a bigger price increase in September. “These last few weeks have been kind of goofy,” a recycler in the Midwest said in early September. “There were rumors a few weeks ago about $50 to even $80 price increases being possible, but now it looks like only $20,” he added.

The October buying period has reportedly demonstrated an outright absence of purchasing by some steel mills, with recyclers already speculating on just how sharp the per-ton price drop will be for October.

On the supply side, recyclers say levels of incoming flow have been stable and steady as summer turns to fall, with manufacturing and demolition activity remaining lukewarm.

Much like the steel industry, the auto industry is summarized as being in better shape than it was in 2008 and 2009, yet still recovering from one of the sharpest sales slumps in the history of the industry.

According to news on the www.TheCarConnection.com, the traditional “Big Three” are all claiming to be on better footing and reporting higher sales of most models. “Chrysler’s sales figures were up significantly versus August of 2009 (with Jeep one of the bright spots, thanks in part to the new 2011 Grand Cherokee), and Ford jockeyed past Toyota for the No. 2 position in the U.S. market,” the website’s deputy editor reported in early September.

Year-to-date, notes the report, “GM sales are up 5 percent,” but sales figures also indicate that August was not a stellar month for the automaker. According to TheCarConnection report, “Buick, GMC and Cadillac were all up versus last year, but Chevy was down 22 percent,” largely because the Chevy brand benefitted the most from the Cash for Clunkers program in the summer of 2009.

World demand for ferrous scrap was steady to even slightly slower in August compared to July. Figures from the World Steel Association (Worldsteel), Brussels, showed world leader China produced slightly less steel in August than July, as did India—a common destination for containerized ferrous scrap.

Not all national steelmaking receded in August, however. Turkey’s steel production rose from less than 2.4 million metric tons in July to about 2.55 million metric tons in August.

In the EU, August lived up to its reputation as a “holiday” month, as steelmakers there produced only 12.1 million metric tons of steel in August compared to 13.9 million tons in July.

Globally, production dropped back from 114.8 million metric tons in July 2010 to 112.9 million metric tons in August.

More recent figures from the United States show a slight decline in steel production as summer turns to autumn. According to the American Iron and Steel Institute (AISI), in the week ending Sept. 18, 2010, domestic raw steel production was 1.71 million tons. That is down 1.8 percent from the previous week’s 1.74 million tons, according to the AISI.

Those figures remain above steelmaking levels reported in 2009. The 1.71 million tons Sept. 18, 2010, figure represents a 15.4 percent increase from the same period in the previous year.

SEPTEMBER 2010 SPOT PRICING