Ferrous

SOFTER SETTING

Although average pricing remained strong to close out 2005, scrap recyclers are sensing a softer start to the new year. West coast shippers in particular are convinced that inventories have built up at Chinese steel mills, with orders from that part of the world hitting a lull in January.

Scrap generation remains healthy in many markets, but the drop in export orders has taken its toll on pricing most heavily on the Pacific Coast. "China’s not taking any orders right now," says one California recycler. "They stocked up in mid-2005."

The softening in demand has also meant a softer price in his market region. "We’re getting about $170 per ton for an 80/20 No. 1–No. 2 mix," the Californian remarked in early January, reporting about a $10-per-ton drop from the month before.

The export orders that are booked are largely coming from brokers serving Asian markets in India, South Korea and Vietnam, he notes.

Generation remained strong from the demolition and contractor segments not only in California, but even in places like Minnesota, Maryland and Ohio. According to recyclers there, the mild winters have allowed many outdoor projects to continue into January that might ordinarily be put on hold because of extreme cold or deep snow.

A stabilization in Chinese scrap demand remains the leading cause of speculation as to what could cause the next sustained dip in ferrous prices. 2005 marked another year of amazing growth in Chinese steelmaking, as the nation accounted for nearly 31 percent of the world’s steel production last year, according to the International Iron and Steel Institute (IISI), which released its year-end figures in mid-January.

That 31 percent figure was up from 26.3 percent in 2004, but talk of overcapacity in China is being broached. "During 2005 it became clear that Chinese production was outstripping demand, and the market was over-supplied," the ISSI states in its 2005 summary news release.

The Brussels-based organization credited steelmakers in the United States with lining up production and demand more accurately by reducing their combined steel production by 5.3 percent.

Japan’s overall steel production remained flat, while "India’s strong economic growth provided the backdrop for a 16.7 percent growth in the country’s steel output," according to the IISI.

In Europe, with its prevalence of electric arc furnace steelmaking, production was down in 2005 by 3.6 percent compared to the year before, as producers curtailed production and relied on built-up inventories.

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

Bayou Steel Corp., baseed in LaPlace, La., has reported net income of $19.3 million for the fiscal year ending September 30, 2005.

Sales for the year were $271.7 million, while sales for fiscal 2004 were $240.8 million. The company credits the increase in sales to an $83- per-ton, or a 19 percent, increase in selling price that was partially offset by a 5.5 percent decrease in shipments. The selling price increase has generally been related to the sharply escalating prices for scrap and the increasing prices for alloys and fuel during fiscal 2005. The company successfully passed several price increases for its products, offsetting its higher costs of scrap, alloys and energy.

"Overall, our fiscal 2005 performance was solid, in spite of a variety of challenges including higher natural gas and electricity prices and disruptions in production and shipments directly caused by the hurricanes which battered the Central Gulf Coast Region," Jerry Pitts, Bayou Steel president and CEO, says. "Our solid earnings and cash flow performance reflect the continuation of favorable steel market demand, pricing, margins and improved operating performance."

Pitts says that Bayou’s scrap processing division successfully procures and prepares scrap metal at attractive prices compared to purchasing prepared material.

The company has opened another scrap processing yard in New Orleans that collects and processes ferrous and nonferrous scrap metals. "The New Orleans and LaPlace scrap facilities continue to benefit from the availability of scrap metal in the Gulf coast area due to the hurricane," Pitt says. "Near term, we expect our scrap processing activities to continue to contribute to strong margins."

Pitts also says he is proud of Bayou’s employees’ performance following Hurricane Katrina. "Our dedicated employees, many of whom suffered significant personal property damage, re-started operations within a week."

MITTAL CONTINUES WEIRTON PHASE-OUT