Ferrous

Steelmakers in North America and beyond are hungry for ferrous scrap. The trick for many recyclers—especially in the Northeast—is to procure enough of the commodity to fill all their orders.

As demonstrated by pricing that has jumped for the third month in a row, demand is putting a strain on supply in the world of ferrous scrap. Market watchers believe that mills that balked at paying $300 per ton in early February were already regretting it by later in the month.

"They were a little too cute," says an Ohio scrap recycler. "They didn’t want to pay $300 per ton in February, now they may be paying $340 in March."

Recyclers in the Northeastern United States and in Eastern Canada have especially seen the conflict between reduced supply and steady-to-increasing demand.

After a mild December and early January, freezing and snowy conditions finally hit the Northeast. "Just moving scrap around right now is tough," says a Pennsylvania recycler. "The weather has killed our scale business, demolition activity is down, and, on the coldest days, trucks with diesel engines were having trouble keeping their fuel liquefied."

A Canadian recycler says he is grateful that he had stockpiled scrap throughout 2006 to feed a new piece of processing machinery. "We picked a nice time to have a huge inventory," he remarks. "We’re able to burn through what we have, but not much new has been coming in since after Christmas."

Says the Pennsylvanian, "We’re cleaning up old scrap that has been at the back of our yard for some time. I think everyone is in the same boat."

The lack of material is not being met with a similar slowdown in demand. Processors report that domestic mills are holding on to steady melt schedules and in many cases have just-in-time (JIT) systems that don’t allow them to stay out of the market for very long.

At the same time, processors in the Eastern United States say they are also getting more inquiries from exporters on the Atlantic Coast looking to fill larger orders. "Overseas buyers are looking for scrap and are willing to pay for it," says the Ohio processor.

The overall impression of recyclers is that scrap demand is outpacing supply, and that situation could remain for another 30, 60 or even 90 days.

Mill buyers who wish to shift grades may have played out the benefits of that strategy. "Everyone who was melting prime looked for cut grades, but now there are not enough of those around," says the Ohio scrap processor. The processor continues, "That spread has narrowed from $40 to $15 per ton, and now there aren’t even enough cut grades around to fill orders."

However, scrap recyclers say they continue to recognize that when it comes to pricing, what comes up always comes back down. Bad news in the auto industry or in the housing sector could serve as the reason for mills to cut back on melt schedules, which could cause ferrous scrap prices to fall back off their recent highs, the Pennsylvania recycler speculates.

Says the Ohioan, "Bad news can be exaggerated. When it turns around, we’ll see the price move down even faster than how it moved up."

In the short term, however, ferrous scrap shippers say they believe the times are good for steel mills and scrap companies, and conditions that mirror those of the past few years are welcome.

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

Gerdau Ameristeel Corp., Tampa, Fla., has reported net income of $378.6 million on net sales of $4.5 billion for fiscal year 2006. This compares favorably to net income of $295.5 million on net sales of $3.9 billion for the previous year.

In 2006 Gerdau completed a host of acquisitions, including a controlling interest in Pacific Coast Steel, a fabricator and installer of rebar with nearly 200,000 tons per year of capacity; the acquisition of Sheffield Steel, Sand Springs, Okla., a mini-mill producer of long steel products with annual shipments of approximately 550,000 tons; and the acquisition of Fargo Iron and Metal Co., a scrap yard and processing facility in Fargo, N.D., with about 50,000 tons of scrap generating capacity.

Gerdau Ameristeel shipped 6.6 million tons of finished steel in 2006, an increase of 4.2 percent from 2005. Average mill prices for 2006 increased $51 per ton, while scrap raw material costs increased $16 per ton. The metal spread for the year increased $36 per ton, and mill manufacturing costs were $249 per ton for the year, compared to $239 per ton for 2005.

Reported regional aggregated spot market prices per gross ton shown for each commodity are based on all Management Science Associates’ (MSA) 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 and No. 1 busheling. Additional pricing information on each grade can be found at www.RecyclingToday.com. To view the most recent numbers click on the following link -- March Pricing

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