Ferrous Report

 Another Rung Up the Ladder

A demand for ferrous scrap just healthy enough to outpace supply contributed to another rise in prices in August, with mills paying from $10 to $22 more per ton depending on the grade and region.

The increases for August were smaller than the $50 to $80 per ton increases seen in July, but they continued a positive trend in ferrous scrap pricing.

A broker based on the East Coast described the market as "not bad, all in all," as thus far there have not been late-summer signals as troubling as those of August 2008, when the market began its historic plunge.

"The ferrous market in the United States is very good," he says, in terms of pricing if not demand. "Mills are paying very good prices but not buying big quantities—just fairly small orders at any one time," he adds.

Demand for container loads of scrap from export destinations is steady as well, says the broker. "Taiwanese mills are buying a little bit," he says. "Purchasing activity from India is very slow," he adds, noting that the slump might be seasonal and temporary. "It may pick up a little by next month."

Some recyclers are concerned that the biggest buyer of all, China, may be winding down its level of ferrous scrap purchases. "They’re still buying, but not very aggressively," says the East Coast broker.

On the supply side, a recycler in the Upper Midwest says his company is "fairly busy, but not robust. Stampings and turnings are are still very far off where they were. If I had to plug in a number, I’d say we’re still 30 to 40 percent down in inbound materials from where we were last year."

The flow of obsolete scrap "has found a comfort zone," he says. "August is kind of sideways."

Spot market buyers in the United States, as indicated by transaction pricing compiled by Management Science Associates Inc. (MSA) for its Raw Material Data Aggregation Service (RMDAS), paid $318 per ton on average for prompt industrial composite grades in August.

That grade, which includes new production scrap such as No. 1 busheling, No. 1 bundles and No. 1 factory bundles, rose by a national average of $22 per ton.

Prices for prompt grades and the other two grades with averages calculated by RMDAS (No. 2 shredded scrap and No. 1 heavy melting steel) stayed most stable in the RMDAS North Central/East region, where they increased from just $10 to $16 per ton. That region includes mills in Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin and the northwest corner of Indiana.

The August boost in prices helped prompt grades to poke through the $300 per ton ceiling, a level that has not been reached since September of 2008, when prices were on their way down from the historic peak reached earlier in 2008.

Global demand for scrap has continued to rise month-over-month throughout most of 2009, as portrayed by crude steel production figures aggregated by the Brussels-based World Steel Association (Worldsteel, at www.worldsteel.org).

Crude steel production in July 2009 for the 66 countries reporting to Worldsteel was 103.9 million metric tons, marking the highest monthly production figure this year.

The July total jumped by more than 4 million metric tons compared to June production, which checked in at slightly less than 100 million metric tons. Compared to July 2008, the world’s steel production was 11 percent lower in July 2009. That comparison is relatively encouraging compared to the year-to-date drop in global production of 20 percent.

China’s crude steel production for July 2009 was 50.7 million metric tons, 12.6 percent higher than July 2008. It is the first time ever that China has produced more than 50 million metric tons of crude steel in one month, and the total accounted for nearly 50 percent of global steel production in July. Since April 2009, both the world and China’s crude steel production have shown steady monthly increases.

In July, almost all the major steel-producing nations—including China, Japan, Germany, the United States, Brazil, Turkey, Russia and Ukraine—demonstrated their highest monthly figures so far in 2009.

Luxembourg-based ArcelorMittal, one of the world’s largest steelmakers with operations on several continents, told its investors in late July that it sees "positive signals" beginning to emerge in the steel market. The firm has recently restarted three of its furnaces and has tentative plans to restart one in Cleveland in the fall. Earlier this year, the company had been running on just nine of its 25 furnaces.

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