Gaining ground

After declining throughout much of 2019, ferrous scrap prices increased by about $20 per ton on average in the U.S. in the November buying period and by another $30 per ton in the December buying period. Aluminum and copper scrap also made gains in pricing during December, with one source based in the Midwest saying she feels aluminum scrap pricing “found the bottom in November and started to turn a little” come December.

Metals processors and traders are hoping the pricing momentum carries into 2020.

Minimill steel producers have benefited from the lower ferrous scrap prices seen over the balance of 2019, as the article “The minimill cost advantage” in this issue notes. According to Ryan Smith of CRU Group, “Operating costs for flat-rolled minimill producers dropped in 2019 as weaker steel markets have pulled down metallics prices. This has meant that operating costs for minimills were in line with integrated producers in the United States throughout much of 2019.”

Smith does not expect that to remain the case in 2020, however, as he writes, “low scrap prices reduce U.S. domestic scrap supply, and the growing minimill sector has an increasing appetite for scrap.”

U.S. scrap yard operators were pointing to less traffic across their scales in the last quarter of 2019. Despite the gains in pricing in the last two months of the year, a shredder operator based in the Southeast says intakes remained low as of December. “We have lost about 35 percent of our volume.”

Lower steel prices overall have affected minimills’ profitability in the last quarter of 2019. In its earnings guidance for that quarter, Nucor Corp., Charlotte, North Carolina, says it expects the performance of its steel mills segment to decrease compared with the third quarter of 2019 as lower steel prices at the end of the third quarter affected fourth-quarter results.

“Metals processors and traders are hoping the pricing momentum carries into 2020.”

“During the fourth quarter, domestic scrap metal prices have risen markedly and our sheet, plate, structural and bar mills have all implemented price increases,” the company says. “We believe this reflects healthy underlying demand for our steel mill products. We expect that the performance of our steel mills segment will improve as we head into 2020.”

Fort Wayne, Indiana-based electric arc furnace steelmaker Steel Dynamics Inc. also predicted lower profitability for the fourth quarter of 2019 relative to its sequential third-quarter results because of two planned outages, seasonally lower shipments and margin compression as average steel prices declined more than scrap costs.

The company adds that underlying domestic steel demand remains principally intact for the primary steel consuming sectors and that customers have been positive concerning the business outlook for 2020.

Scrap recyclers and steel producers are hoping that positivity remains as 2020 progresses.