Weather provides a floor

Ferrous scrap prices, after dropping several dollars per ton in January and February, broke the brief cycle of downward momentum by regaining a few dollars per ton for high-volume grades in most of the United States.

Some late winter weather and increased bids for scrap from overseas buyers on the West Coast helped provide a floor to scrap prices. According to Fastmarkets AMM, rivers swollen with rain and melting snow created difficult barge conditions in parts of the Central U.S. in late February and early March, causing mill buyers in some regions to bring in scrap by truck at a higher price.

The West Coast export pricing survey produced by the publication also revealed a $17.50 per ton price increase for scrap exported from Southern California, a reflection of some opportunistic buying after a lackluster start by such buyers in the first two months of the year.

Despite statistics indicating a potential slowdown in the automotive sector, a scrap recycler in the Detroit region told Recycling Today that as of early March, “flows have been good” in the first quarter of the year.

The U.S. shipped out more than 16.1 million metric tons of ferrous scrap in the first 11 months of 2018, eclipsing the 15 million metric tons exported in all of 2017.

The lackluster offers overseas buyers are making remain a concern for processors on the East Coast. The March Fastmarkets AMM East Coast export price for heavy melting steel (HMS) rose by just $1 per ton, remaining less than $300 per ton as of early March.

The Reston, Virginia-based United States Geological Survey (USGS) has compiled scrap export data for the first 11 months of 2018, providing a nearly complete snapshot of activity during the prior year. With the year’s statistics nearly complete, Turkey has cemented its traditional 21st century role as the biggest overseas buyer of ferrous scrap from the U.S., having purchased more than 3.2 million metric tons with December’s purchases yet to be tallied.

Three other nations purchased more than 1 million metric tons in that time frame, with two of them being reachable by land rather than sea: Mexico at 1.7 million metric tons and Canada at 1.3 million metric tons.

In addition to Turkey, the other major waterborne buyer of U.S. scrap is Taiwan, purchasing more than 1.7 million metric tons in the first 11 months of 2018. Vietnam, at 980,000 metric tons purchased through November, might be the only other overseas trading partner to break 1 million metric tons in 2018.

The good news for recyclers is that despite concerns about global trade barriers and tariffs, the U.S. exported more than 16.1 million metric tons of ferrous scrap in the first 11 months of 2018, already eclipsing the 15 million metric tons the USGS says were exported in all of 2017.

Ferrous scrap has traded between roughly $300 and $400 for more than one year, with steep drops or spikes having only an occasional presence. However, backers of ferrous scrap futures and trading contracts continue to say they see reasons why processors, sellers and buyers can benefit from understanding the hedging aspects of using these types of contracts.

“Price volatility and opportunity are key drivers” toward using such contracts, says Mike Frawley of New Jersey-based World Steel Exchange Marketing (WSEM). What type of volatile month or months it might take to boost contract trading in the ferrous space remains a question. Frawley says, “The tipping point for many will come when the pain of not being hedged will outweigh the fear of taking the plunge.” (More on this topic can be found in the article “Building momentum” in this issue.)

Overall concerns about the direction of the world’s largest economies (the United States, the European Union and China) remain steadily rehashed in the global financial press.

Additionally, concerns are being expressed by the construction sector, which in February 2019 saw its first drop in total sector employment for the first time in more than two years, according to the Washington-based Associated Builders and Contractors (ABC). However, the month-over-month loss of 31,000 jobs may largely have been attributable to the same nasty weather that impinged scrap flows.

In the manufacturing sector, vehicle sales have dropped for eight consecutive months in China. While this does not affect scrap flows into yards in the U.S., it could well have a considerable impact on global steel and scrap pricing going forward.