Ferrous

Ferrous scrap pricing exhibited relative stability in the January buying period, with mills in the United States on average paying within a few dollars per ton of what they paid in December.

National averages for mill spot prices for prompt industrial scrap, shredded scrap and No. 1 HMS all moved narrowly in the $9- to $12-per-ton range, according to transaction pricing compiled by Management Science Associates Inc. (MSA) for its Raw Material Data Aggregation Service (RMDAS).

The stable pricing scenario meant mills paid on average $260 per ton for prompt industrial grades, $250 for shredded scrap and $201 for No. 1 heavy melting steel (HMS).

Shredded scrap took the closest thing to a jump, with spot buyers paying on average $12 more per ton for what RMDAS defines as No. 2 shredded scrap (.17 or above copper content).

Regionally, the North Central/East region (which stretches north to south from New England to northeastern North Carolina and west to Ohio, Michigan, Kentucky and much of Indiana) witnessed the most price movement, with buyers paying from $11- to $15-per-ton more, depending on the grade.

The South region (which includes the Gulf Coast states, Texas, Oklahoma, Arkansas, Georgia, Tennessee, most of the Carolinas and western Virginia) saw less price movement for its scrap. It also includes the only regional case of a grade losing value, with mills in the Southeast paying $6 less per ton on average for No. 1 HMS.

A scrap recycler in the Northeast reports heavy January buying in the export market, particularly from Turkey, which may have helped boost pricing in that region. "We’re having to export a lot of material since the domestic market is so weak," he comments "We’ve loaded four barges with about 100,000 tons of metal headed for Turkey."

An exporter in the Mid-Atlantic region says buyers in India and some other markets are still buying containerized ferrous scrap, but the Chinese market remains quiet. "I’m not convinced that there will be a lot more melting going on over there immediately after the Chinese New Year, but that combined with a $600 billion infrastructure program could boost scrap demand," says the exporter.

The perceptions of a dormant domestic market are backed up by statistics from the American Iron & Steel Institute (AISI). Domestic steelmakers were especially quiet during the holiday season, with the AISI calculating a mill capacity utilization rate of just 33.5 percent for the week that ended Dec. 27.

That figure marks a low in recent memory and represents weekly total steelmaking production of around 800,000 tons—down some 60 percent compared to the same week at the end of 2007.

The new year showed only a slight rebound, with AISI figures for the week ending Jan. 3, 2009, showing utilization rates at 36.3 percent and production at 866,000 tons.

Those weekly utilization figures extrapolated over an entire year paint a gloomy picture of annual national production at below 50 million tons (compared to more than 100 million tons in recent years). Forecasters do not typically view the holiday season production figures as being representative for an entire year, however.

As tepid as demand is, a dwindling of supply has helped provide a lower-level form of equilibrium to the market. Supply from industrial sources has declined considerably, and a recycler in the Southeast says there is less generation from formerly reliable demolition sources.

The recycler in the Northeast says a great deal of work also has to go into luring retail scrap across the scale. "We’re not waiting for scrap," he remarks. "You have to do more things [and] do whatever the customer needs right now. When it was $600 per ton, it automatically came in."

On the industrial scrap generation side, overall manufacturing numbers in the United States were not down as dramatically as the steelmaking numbers in December. Nonetheless, a 2 percent drop in the Federal Reserve’s December data was described as "bigger than expected" in a Reuters news report.

The economists contacted ahead of the report by Reuters had expected a 1 percent drop in December after a 1.3 percent decline occurred in November. According to Reuters, "For the fourth quarter [of 2008] as a whole, total industrial production fell 11.5 percent at an annual rate."

While steel mill capacity utilization reached the 35 percent level in late December, overall industrial capacity utilization was calculated at 73.6 percent, according to the Federal Reserve.

The declines in utilization were more than just seasonal, statistics indicate. The industrial production figure in December 2008 was down 7.8 percent compared with December of 2007, and the capacity utilization figure "was 7.4 percentage points below its average level from 1972 to 2007," according to the Reuters report.

In mid-January, Chinese steelmaker Baoshan Iron and Steel raised its prices for several products, and ArcelorMittal re-started a blast furnace in the Ukraine. Ferrous scrap recyclers within the United States are hopeful these are positive signals from overseas consumers.