Ferrous Report

UPS AND DOWNS

Recyclers and traders are reporting volatility in the ferrous scrap market, as by mid-November strong bidding emerged for ferrous scrap after a two-month lull.

Early November played out like October, as prompt industrial grades joined other ferrous scrap grades at that time by dropping below $300 per ton in value, according to transaction pricing compiled by Management Science Associates Inc. (MSA) for its Raw Material Data Aggregation Service (RMDAS).

Steel mill buyers of prompt grades on the spot market at that time were paying $276 per ton on average, down $40 per ton compared with the $316 average price paid in October.

The November buying period marked the second consecutive month RMDAS prices moved down in the United States, countering an upward pricing trend that had run through July, August and September.

Recyclers are reporting that the trend is likely to flip back to pricing gains in December. From mid-November on, strong export buying for both bulk loads to Turkey and container shipments to India have bid prices back up.
In early November, mill buying prices dropped nearly in concert among the three grades for which RMDAS releases figures—the prompt industrial composite, No. 2 shredded scrap and No. 1 heavy melting steel (HMS).

As in October, prompt grades retained their $40 spread in value compared with shredded scrap, while shredded scrap remained about $20 per ton more valuable than No. 1 HMS.

On the supply side, a recycler in the upper Midwest says scrap flows remain light, with industrial scrap generation termed “absolutely dead” and the obsolete and demolition side also slow. He characterized his demolition and construction contractor customer base as living “hand to mouth” with very few projects booked for the future.

Although a slump in export demand was considered a culprit in October, global steelmaking figures show that most nations continued to produce steel at healthy levels in that month. That has been reflected by the new surge in buying in late November.

“There has been a pickup in pricing on the East Coast because of export demand from Asia,” a recycler in the mid-Atlantic region says of the situation in mid-November. “Demand hit bottom in very early November, but the Turks have come back in during the last week and a half and bought a bunch of cargos,” he adds.

In the Southeast, a recycler reports, “There’s a lot of export bulk buying going on up in the Northeast, and there is also a lot of demand by container.” He adds, “We had been setting aside material for a bulk cargo, but we’re selling so much in containers we may change that.”

The Southern recycler adds, “The market has heated up. India seems to be running good—it’s in its dry season so there are no weather interruptions.”

Regarding freight, he says, “There is an abundance of containers, although freight rates have gone up. That hasn’t really stalled [the buying] the way we thought, though.”

In the United States, domestic production continues to edge higher—though slowly. Steel producers in the United States, according to the American Iron and Steel Institute (AISI), produced more than 1.55 million tons of raw steel in the week ending Nov. 14. This was up from just 1.54 million tons the week before, marking a mere 0.9 percent gain.

The upper Midwest recycler adds that “mills are not buying their winter pile; that’s curious.” He continues, “Even though prices were down and bargains for the mills, they still placed limited orders.”

Recyclers are trying to determine whether steel mills in North America are keeping their inventories low for year-end accounting reasons or whether they’re also unsure of upcoming finished product orders for the first quarter of 2010.
The recycler in the mid-Atlantic remarks, “I would have thought that mills would have wanted to end the year with as little inventory as possible, but if they think prices are going to go up further in January, they may be better off buying [scrap] cheaper in December.”

The Southern recycler wonders whether some mills can afford to make large-volume pre-winter purchases. “They just don’t have any business,” he says of some electric arc furnace (EAF) mills. He adds, “What little business they have, they’re casting billets and exporting them.”

He says he has heard, though, that a re-bar mill in his region has been increasing its purchases and melting schedule, providing a glimmer of hope for more domestic buying.

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