The February ferrous scrap market offered processors and traders little help in any attempt to read the tea leaves to figure out where prices might be headed in the spring and summer. Sufficient demand kept some grades from dropping for the second month in a row, but the overall direction of prices hardly could be called a rebound.
Prices calculated and published by Fastmarkets AMM Feb. 9-10 for benchmark Midwest and export grades showed three rising prices and two that declined.
Overseas buyers bid up the price of scrap departing from New York and Los Angeles by $30 and $24 per ton, respectively. That overseas demand did little to spur domestic buyers to pay more for busheling, however, as that grade fell by more than $20 per ton in the Midwest.
Steady demand from overseas buyers and the arrival of snowstorms that constricted supply during parts of January and early February boosted prices off the East Coast.
On the demand side, Davis Index reported buyers in Bangladesh, India and Pakistan bidding higher in early and mid-February, though prices started flattening the third week of February.
“Commodity prices could soar if the Russia-Ukraine crisis escalates. Russia is a commodities powerhouse, with it being a key supplier of [metals].” – Warren Patterson, ING Economics
In the United States, steelmakers have been reporting profitable 2021 results, with most of them also professing encouragement regarding their prospects for 2022. Wider economic indicators could be causing uneasiness in some corners, however.
Regarding the year just completed, concerns about inflation or potential conflict in Ukraine did not enter into the profit and loss calculations of steelmakers and publicly traded scrap processing firms.
Economists searching for vaccine dividends need look no further than the record 2021 profits for electric arc furnace steelmakers, such as Nucor Corp. and Steel Dynamics Inc.
Even steelmakers with the remaining blast furnace/basic oxygen furnace (BOF) technology in the U.S. reported black ink in 2021. In late January, U. S. Steel President and CEO David B. Burritt declared that Pittsburgh-based company’s “balance sheet has been transformed” after its net earnings of more than $1 billion in Q4 of 2021.
Also feeling flush is Cleveland-Cliffs, which now operates blast furnace/BOF mills formerly owned by AK Steel and ArcelorMittal. In mid-February, the company and its CEO Laurenco Goncalves announced record full-year and fourth-quarter 2021 results.
The Cleveland-based firm has its roots in iron ore mining, processing and shipping. Goncalves described its plunge into steelmaking by saying, “Our revenues grew more than 10 times from $2 billion in 2019 to over $20 billion in 2021. All this growth was profitable growth, generating $5.3 billion of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and $3 billion of net income this past year.”
The wide margins in steelmaking might not have been quite as expansive in the scrap processing sector, but steelmakers with scrap subsidiaries and publicly traded scrap firms also have reported profitable conditions in 2021.
What could spoil the party? Experienced processors and traders have seen many black swans, and the trouble doesn’t always come from within U.S. borders.
The threat of a Russian invasion of Ukraine has caused unease in Europe. How a conflict in that region would affect global metals markets is uncertain, but at least one analysis sees higher steel prices as a potential impact.
In late January, S&P Global Platts quoted a commodities analyst with ING Economics as saying, “Commodity prices could soar if the Russia-Ukraine crisis escalates.” Warren Patterson, head of commodities strategy at ING, also is quoted as saying, “As tensions between Russia and Ukraine grow, so does the risk that it spills over into global commodity markets. Russia is a commodities powerhouse, with it being a key supplier of [metals].”
Opaqueness regarding economic circumstances in China also leads to guessing games when it comes to global iron and steel markets.
Chinese economy skeptic Gordon G. Chang wrote a book titled The Coming Collapse of China a full 20 years ago, but he has not relented in his prediction that a debt- and property value-related reckoning is inevitable.
In a February contribution to Newsweek, Chang writes, “Total sales of the country’s top 100 developers plunged 39.6 percent year on year by value” this January. That considerable decline is despite Chang’s allegation that government officials in some “Chinese cities are refusing to register transactions at prices below government-set levels.”
Explore the March 2022 Issue
Check out more from this issue and find your next story to read.
Latest from Recycling Today
- South Carolina launches recycling app
- Resource Recycling Systems transitions to employee ownership model, refreshes branding
- APR upgrades PCR certification program
- WM completes $40M automation project at Philadelphia MRF
- Speira commissions new furnace in Germany
- ABB report portrays paper sector circularity, emissions reduction
- RMDAS and Davis Index numbers portray stalled ferrous market
- Attero adds NGO veteran to its board