Ferrous

ADDED VALUE

Amazement at new price ceilings for ferrous scrap continued into the summer, as prices paid in the first half of July hit new per-ton record averages.

If there is to be a summer slowdown in the ferrous scrap market, it wasn’t reflected in July, as pricing for all grades of ferrous scrap moved up by from $28 to $98 per ton on average nationally.

The record-breaking month was reflected in the spot market prices compiled by Management Science Associates (MSA), Pittsburgh, through its Raw Material Data Aggregation Service (RMDAS).

The RMDAS prompt industrial composite grade averaged $878 per ton nationally, up nearly $100 per ton over prices paid by mills in June. Shredded and No. 1 HMS scrap also increased in price, though not as dramatically. Buyers paid an average of $47-per-ton more for No. 2 Shredded scrap nationally and $28-per-ton more for the No. 1 HMS grade.

Demand held steady or increased for all grades of scrap, but the biggest supply strain remains on new production scrap, used to define the RMDAS prompt industrial composite grade.

Recyclers in both the Northeast and the Southwest report separately that inventory to feed their shredders is healthy and flow is good, but that factors both seasonal and relating to the wider economy are keeping the flow of industrial scrap modest.

A scrap recycler in the Southwest says he believes a combination of domestic mills with built-up inventory and a slowing of overseas demand will reverse the pricing momentum in August.

"Buying is very limited at the moment," he says. "The mills are fairly full or very full," he continues, referring to EAF (electric arc furnace) mills both in Texas and in Mexico.

In the Northeast, a scrap recycler reports that turning inventory quickly is his biggest challenge, as obsolete scrap continues to flow across scales and into shredder inventory stockpiles.

Even if the demand for that scrap pulls back slightly in August, global steelmaking figures indicate that the world’s appetite for scrap has grown significantly again this year.

Figures for June 2008 compiled by the IISI (International Iron and Steel Institute), Brussels, show only a slight seasonal drop off in June steelmaking compared to May. The June 2008 figure of 118.8 million metric tons was more than 1 million tons lower than for May of 2008. However, it outpaced last June’s production by more than 6 million tons.

Steelmakers in the United States produced nearly 600,000 metric tons less steel in June compared to May, but the figure nearly matched June of last year. Year-to-date, American steelmakers have produced steel at a 4.7 percent higher volume in 2008 compared to 2007.

In the first six months of 2008, China produced 263 million metric tons of crude steel, an increase of 9.6 percent compared to the same period in 2007. Overall, Asia produced 68 million metric tons of steel in June 2008, representing an 8.7 percent increase over what was produced last June.

Eastern Europe and the Middle East are also part of the story. While the production pace in the European Union was just 1.8 percent higher compared to June of last year, steelmakers in seven countries of Eastern and Southern Europe that are not part of the EU showed an increase of 15.5 percent in production compared to June 2007.

Turkey’s crude steel production of 2.5 million metric tons was 17.5 percent higher than the same month last year. Year-to-date, Turkey has produced 10.6 percent more steel in the first six months of 2008 compared to the first half of last year. This is particularly good news for scrap exporters, as a healthy percentage of Turkey’s mill capacity is in the form of EAF facilities.

Several other nations in the Middle East and Asia are showing similar growth patterns, with Saudi Arabian steelmakers producing 18.6 percent more steel in the first half of 2008 compared to 2007 and Taiwan’s steelmakers having made more than 1.2 million metric tons more steel in the first half of this year compared to 2007—a growth rate of 11.6 percent.

Such global indicators are helping to convince recyclers that even if mills and brokers pull back from buying in August, the subsequent decline in demand and drop in pricing will probably be short-lived. "I think August is going to see a drop," says one recycler, "but then September will be a boomer—a real catch-up month. I tend to be optimistic, and I’m not sure August will even go down that much," he comments.

The clouds on the horizon include China putting the brakes on its industrial infrastructure for an August Olympics holiday, but provided that nation ramps back up after the closing ceremonies, the strength of the global economy points to a continued demand for steel and the scrap needed to produce it.