Ferrous Report

NICE WORK IF YOU CAN GET IT

Processors of ferrous scrap have experienced two straight months of price increases, which carry the potential for them to earn a nice margin on their material.

The statistical summary of January spot buying from the Raw Material Data Aggregation Service (RMDAS), compiled by Management Science Associates’ (MSA), Pittsburgh, shows mills in the northern United States paying from $45 to $55 more per ton for scrap. Prices in the South rose less steeply (by $30 to $37 per ton).

The scarcity of prompt industrial grades continues to be reflected in the RMDAS numbers. On the January spot market, buyers throughout the United States paid an average of $53 more per ton for prompt grades (No. 1 busheling, No. 1 bundles and No. 1 factory bundles), hiking the national average to $387 per ton.

Regionally, mill buyers in the South were most successful at preventing prices from rising too far in January. While mills in the RMDAS North Central/East and North Midwest regions were paying from $306 to $389 per ton (depending on the grade), mills in the South paid in a narrower range from $308 to $362.

In the North, weather has become a factor in scrap flows, as some parts of the country started 2010 with 10 to 14 straight days of snowfall. The South experienced colder temperatures, light snow and freezing rain as well.

Weather considerations aside, many processors have characterized December and January scrap flows as having been helped by higher scale pricing, using terms like “better than expected.”

Nonetheless, most processors still point to weaknesses in the supply equation. “There really isn’t any construction- or demolition-related material to speak of,” says one buyer in the Great Lakes region. He also notes that industrial production in his operating region, much of it tied to the “Big Three” producers in the automotive industry, remains muted.

A processor in northern Ohio portrayed flow into his facility more positively, saying of ferrous scrap, “It’s out there, but you have to look for it.”

A processor in western Pennsylvania also says he has been relatively pleased with flow in December and January. “We really can’t complain—we have some material on the ground that we need to prepare,” he says.

In the Carolinas, a scrap yard owner says flow was unexpectedly good in December, to the point that by the end of the month he had paid out a good deal more in cash than he had planned for at the beginning of the month.

Even with flow having improved somewhat, most of these same processors say they see ferrous scrap pricing retaining its $300 to $385 per ton pricing in February because supply is still far from abundant.

“The wild card is exports,” says the recycler in the Great Lakes region when considering what could cause prices to slip back. As of the third week in January, it was still not clear how export orders for February were shaping up. “If those orders don’t come in, companies like Nucor will probably be able to bargain for lower pricing,” he remarks.

Globally, the world’s largest steelmaking nation closed out 2009 with its production lines continuing to churn out crude steel. A summary released in January by China’s National Bureau of Statistics pegged crude steel output in December 2009 at 47.7 million metric tons.

That figure is more than 26 percent higher than the December 2008 figure, when China’s economy was temporarily reeling. The December 2009 production level was essentially flat compared with the 47.3 million metric tons produced the month before.

For the entire year of 2009, China’s steelmakers produced 568 million metric tons of crude steel. That amount was an increase of 13.5 percent compared with the year before, when total output was at 500 million metric tons.

The importance of China in overall metallics (iron ore, ferrous scrap, scrap alternatives) markets becomes apparent when looking at 2009 year-end figures from many nations in the developed world.

The Japan Iron and Steel Federation says that nation’s steel companies produced 87.5 million metric tons of steel, off from its traditional level of 100 million metric tons or more of crude steel output.

Conditions in Europe can be seen by looking at Italy’s year-end 2009 numbers. That nation’s steel association Federacciai calculates that Italy’s steelmakers produced 35 percent less steel in 2009 versus 2008.

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