Ferrous Department

Scrap processors and steel mill buyers bought and sold scrap in June at pricing nearly identical to May’s transactions.

Transaction pricing compiled by Management Science Associates Inc. (MSA) for its Raw Material Data Aggregation Service (RMDAS) showed national spot market buyers paying within $10 per ton on average in June of what they paid in May for all grades of ferrous scrap.

Price differences of $9 or $10 per ton marked the extreme during a month when, in the Northern and Midwestern United States, mill buyers most commonly paid within $4 per ton in June of what they paid in May.

The end result for national averages as compiled by RMDAS in June was spot buyers paying $3 per ton more for shredded scrap, $3 per ton less for prompt grades and $2 per ton more for No. 1 heavy melting steel (HMS).

Prompt grades, even with the slight dip, retained the greatest average value on the spot market at $226 per ton, followed closely by No. 2 shredded scrap at $217 per ton and No. 1 HMS at $190 per ton.

Regionally, spot buyers in the South in June paid above the national average for all three grades of ferrous scrap, and June pricing for all three grades in the South moved upward from where it had been in May.

The difference between pricing in the South and the RMDAS North Midwest region shows spreads in June that favor the North Midwest mill buyers. Buyers in the South paid, on average, $15 per ton more for prompt grades, $15 more per ton for shredded scrap and $8 per ton more for No. 1 HMS.

Addressing attendees at the Bureau of International Recycling (BIR) World Recycling Congress in May, Blake Kelley of Sims Metal Management remarked that scrap prices had remained relatively high because supply had declined and exports from the United States were continuing at "historic high rates."

Kelley also commented that with many blast furnaces shut down, the percentage of steel made in scrap-consuming electric arc furnaces was probably increasing.

Kelley predicted that scrap prices would "stay in a narrow band," restrained from rising by steel prices that were not likely to rise until idled steelmaking capacity restarted. Helping to provide a floor on pricing are the increased costs of collection and processing, a relatively depleted reservoir of obsolete scrap and heightened competition among dealers for available volumes.

Based on data from the World Steel Association, Kelley predicted that global apparent consumption of purchased scrap will decline by more than 100 million metric tons this year. "The world does not need 1.4 billion metric tons of steel today, as was the annualized run rate at the peak in June 2008," he stated.

The future direction of the steel industry remains unclear, although global statistics for May have offered the first bit of encouraging data in a while.

World crude steel production for the 66 countries reporting to the Brussels-based World Steel Association has been reported as 95.6 million metric tons in May, a 7 percent increase over the 88.9 million metric tons produced in April.

That positive step does not alter comparisons to one year ago, when in the first half of 2008 the world was producing steel at a record clip.

Compared to output in 2008, steel production remains lower. The May 2009 total is 21 percent lower compared to the 121 million metric tons of steel produced in May of 2008.

China’s crude steel production for May 2009 was 46.5 million metric tons, 0.6 percent higher than that nation’s output for May of 2008.

Year-to-date, world crude steel production for the first five months of 2009, as calculated by WorldSteel, was 449 million metric tons, a 22.4 percent decrease vs. the same period of 2008.

China’s production of 217.2 million metric tons of crude steel for the first five months of 2009 shows a slight increase of 0.4 percent vs. last year and for 2009 makes up close to half of the global total.

Nearly every other major steel-producing country has shown a decrease for the first five months of 2009 compared to 2008. However, most major steel-producing nations, including the United States, Germany and South Korea, produced more steel in May of this year than in April. Output in the United States moved up by 8 percent in May compared to April.