Ferrous Department

Mill buyers and ferrous scrap recyclers alike may be wondering if the ferrous scrap trading range is beginning to narrow a little bit after a very volatile run through 2005 and parts of 2006.

Ferrous scrap traded for a few dollars less per ton in November compared to the month before, according to figures compiled by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates Inc. (MSA), Pittsburgh.

The bad news for recyclers who like high prices is that November marked the second straight month of mills paying less per ton. But for recyclers who most wish to see reduced volatility, the good news is that average pricing—though down—did not swing dramatically in November.

The RMDAS North Midwest region (which includes mills in Minnesota, Iowa, Illinois and northwestern Indiana), showed the steepest decline, with mills there paying $26 per ton less for prompt industrial grades, $17 per ton less for shredded scrap and $12 per ton less for No. 1 HMS.

Average buying prices fell less sharply in other regions, with the No. 1 HMS grade remaining even with its October price in the North Central/East region, which includes Michigan, Ohio, Pennsylvania, Kentucky and New Jersey.

Overall, a downward price trend for ferrous scrap continues, but the pace of the decline in November seems to have slowed compared to months such as August and October. Market players hoping for a bounce-back, such as ones that occurred in February or September, however, were probably disappointed.

Compared to one year ago, domestic mills are paying an average of $47 less per ton for Prompt Industrial grades, $28 per ton less for No. 2 Shredded Scrap and $30 less for No. 1 HMS.

In that 13-month span, average national pricing for the prompt industrial grades reached as high as $344 per ton this June. The $231 average for this November marks the lowest average price for those grades.

The pricing changes seem narrow enough to have had little effect on scrap flows. A Cleveland area recycler comments that scrap supplies are certainly "not loosening," as seasonal production shutdowns hurt industrial supply and stable-to-lower pricing prevents a sudden surge in across-the-scale traffic.

A tapering of the copper scrap frenzy may also show some strain in the ferrous supply, as a combination of lower red metals pricing and a worked-through inventory of copper scrap could detract from overall peddler traffic.

On the demand side, American and Iron Steel Institute (AISI) figures for late October and early November have shown four straight weeks of capacity utilization in the 80 to 81 percent range, down from figures in the 87 percent range as recently as late September. However, adjusted year-to-date production through Nov. 18, 2006, was 94.2 million tons, at a capability utilization rate of 86.2 percent.

Providing a possible lift to the overall market, however, is increased buying from overseas consumers and the export brokers who are working on their behalf. Rather than going to China, however, many of the cargoes are heading to other East Asian nations as well as off the Atlantic Coast to European nations with significant electric arc furnace mill capacity.

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

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.

© 2006 Management Science Associates Inc. All rights reserved RMDAS is a trademark of Management Science Associates Inc.

Evraz Group S.A., based in Luxembourg and Russia, has agreed to purchase Oregon Steel Mills, Portland, Ore., for approximately $2.3 billion. The two companies jointly announced the signing of a definitive agreement that has been "unanimously recommended" by the Oregon Steel Mills board of directors.

"We are pleased to announce another transaction in line with our long-term strategy to develop higher value downstream markets complementary to Evraz slab production," says Alexander Frolov, chairman of Evraz.

Evraz Group bills itself as "one of the largest vertically integrated steel and mining businesses with operations mainly in Russia." The company, which owns three steel mills in Russia plus one mill in Italy and another in the Czech Republic, produced 13.9 million metric tons of crude steel in 2005.

The combined company will produce more than 16.8 million metric tons of crude steel and will have more than 17.4 million metric tons of steel shipments in 2006.