The shred also rises

Ferrous scrap prices in the U.S. Midwest and on both coasts held fairly steady in the early May buying period, with the exception of ferrous shred, which enjoyed a $20 per ton boost in the Midwest.

Surveyed pricing from Fastmarkets AMM shows prompt scrap and No. 1 heavy melting steel (HMS) selling for within $1 per ton of its April pricing. The $20 boost in shred pricing, meanwhile, seems to indicate scrap processors are not swamped with material, even though scale prices have been lofty through the first five months of the year.

Although snowstorms more often affect January or February pricing, several inches of snow in the third week of April pinched supply in parts of the country, while a global microchip shortage continues to put a damper on some automotive production in the United States.

“We should expect scrap prices to appreciate in the international market.” – Lourenco Goncalves, Cleveland-Cliffs

Steel mills in the U.S. are operating at more than 78 percent of capacity, according to the Washington-based American Iron and Steel Institute. Nearly 1.8 million tons of steel are being produced each week in the U.S., bringing the sector close to where it was before COVID-19-related effects began making an impact in March 2020.

Export markets are contributing to demand, with one trader telling Recycling Today, “All markets are buying scrap; India a bit less, but there’s good demand all over. I can see this going on for the duration of the summer.”

The trader adds, “Everyone has demand for steel. As a result, everyone has demand for scrap. We are now in $500 price range territory, and anyone who does not see that is simply in denial; $500 for scrap is the new $300.”

By the second week in May, the financial press and some analysts were expressing greater concern for inflation. An April 4.2 percent year-on-year rise in the U.S. consumer price index (CPI) was one of the largest in years, and commodities are a factor in the rise.

“The man in the street feels prices in their totality, and probably feels that 4.2 percent is underreporting,” writes John Browning, a Shanghai-based futures trader with Bands Financial Ltd. “Used car prices have risen 20 percent in the first four months of 2021 as U.S. car production is compressed due to a shortage of semiconductors. Rising rental costs, reflecting the 12 percent rise in house prices year on year, are yet to filter into the data numbers. So, there is plenty of potential for the CPI to rise further.”

Consumers of finished and semifinished steel are again asking elected officials to reconsider steel tariffs put in place by the administration of former President Donald Trump and thus far retained by the administration of current President Joe Biden.

A group called the Coalition of American Metal Manufacturers and Users (CAMMU), Washington, sent a letter to President Biden May 6 calling for “the immediate termination of the Section 232 steel and aluminum tariffs.”

The CAMMU, which consists of trade associations that represent more than 30,000 companies, says the Section 232 tariffs have caused a situation where “on some products, American businesses pay 40 percent more for similar steel compared to their European counterparts,” adding that it is “an unsustainable situation for any U.S. employer.”

In the meantime, U.S.-based steelmakers are reporting impressive earnings and issuing optimistic outlooks. While $500 per ton of scrap could be lofty territory for processors, steelmakers are fetching record-high prices for some of their products, such as $1,900 per ton for some types of steel pipe.

Some of these profits are being invested in new capacity, such as the Commercial Metals Co. electric arc furnace micromill, which is about to ramp up in Mesa, Arizona.

In a presentation at the mid-April online Fastmarkets AMM Scrap, DRI & Minimills Conference, CEO Lourenco Goncalves of Cleveland-Cliffs said that it’s about time that “a ton of steel is worth more than a ton of bananas.”

Rather than apologizing for higher steel (or scrap) prices, Goncalves said, “We should expect scrap prices to appreciate in the international market. That’s motivated by demand and by the environmental push toward less generation of greenhouse gases throughout the entire world.”

For Cleveland-Cliffs, the scenario paints a potentially bright picture for its Toledo, Ohio-based hot briquetted iron (HBI) facility and its comparatively emissions-friendly iron pellets made in the U.S. and for the company’s flexible steelmaking capacity in the U.S., Goncalves said.

“Having our own iron ore and [ability] to produce environmentally friendly pellets and environmentally friendly HBI puts Cleveland-Cliffs in a unique position, not just from a cost standpoint, but also from an environmental standpoint,” he said.