Losing some of its value

About one month into summer, ferrous scrap processors were watching their inventories lose some of their value as domestic consumers and overseas buyers made lower bids.

Using the plate and structural (P&S) grade as an example, Davis Index shows the average price paid by domestic consumers falling from $417 per ton at the outset of June to $378 by the second week in July.

P&S has not been the only grade losing value. U.S. mills and foundries paid an average of $343 per ton at the start of June for No. 1 heavy melting steel (HMS), which fell to $312 by the second week of July.

Shippers with export access might have fared slightly better in June, though many overseas buyers’ prices started sliding in July.

“Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6 percent over the past year.” — Anirban Basu, chief economist, Associated Builders and Contractors

Using HMS shipped via bulk vessels from New York as a gauge, Davis Index shows sellers were fetching about $361 at the start of June. Unlike the nearly $30-per-ton losses in the domestic market, that price had fallen less than $10 per ton by the second week of July.

While the U.S. economy might not be in a recession, activity in the steel sector this year clearly is lagging last year.

With more than half the year tracked, the Washington-based American Iron & Steel Institute has recorded year-to-date steel output in the U.S. as being down 2.7 percent compared with the first six months of last year.

With five months of overseas scrap market data in the books, the World Steel Association (Worldsteel), Brussels, reports steel output in Turkey is down 19.1 percent year on year.

Steel output in Japan, South Korea and South America also is down compared with last year. One bright spot is India, now the world’s second-largest steel producer, with an output that has risen 5.7 percent this year.

But U.S. end markets for steel and scrap could be facing several challenges, according to recent reports.

In the construction sector, the U.S. Census Bureau reports a 0.2 percent decrease in nonresidential construction spending in May, causing concerns about a slowdown in what has been a healthy economic subsector.

“Nonresidential construction spending declined in May, ending a streak of 11 consecutive monthly increases,” says Anirban Basu, chief economist of the Associated Builders and Contractors, Washington. “While spending is up more than 17 percent over that span, manufacturing-related construction has accounted for the majority of that increase. Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6 percent over the past year.”

The automotive sector also is of interest to scrap processors, and nervous looks are being cast toward the emerging electric vehicle (EV) market and the future of vehicle ownership.

According to a McKinsey report, 1.3 billion vehicles are in use worldwide, with many being privately owned. There are 868 vehicles per 1,000 people in the U.S. according to the report.

“The mobility ecosystem will most likely undergo a transformation not seen since the early days of the automobile—and one main shift will be the decline of private car use,” McKinsey says of the outlook for the next decade.

The McKinsey Center for Future Mobility conducts an annual consumer survey of automotive trends, and many respondents to the 2022 survey are open to shifting their transportation habits.

Nearly half of respondents say they are open to replacing their private vehicles with other modes of transport in the coming decade.

For example, 70 percent indicated they are willing to use a shared autonomous shuttle with up to three other travelers, with 42 percent of those trips replacing ones taken by private vehicles.

McKinsey says such modes, including ride-hailing, are on the rise as consumers look for transportation options that are convenient, cost-effective and sustainable.

The report says the appeal of private ownership remains strong in many countries despite the rise of ride-sharing services.

Governments in some nations already are enacting regulations to reduce the number of vehicles on the road to ease congestion and reduce emissions, with consumers voicing preferences for more efficient, green and convenient options.

The forecast predicts private cars could be used for just 29 percent of all trips by 2035, adding that car sales likely will rise globally over the next few years, peaking by the end of this decade. They could then fall to 84 million units by 2035, down from the 85 million in 2015.

Should that prove accurate, auto dismantlers and metals recyclers, like manufacturers, will have to consider the implications of a smaller passenger vehicle sector on their operations.