Incremental gains offer glimmers of hope

In October, a modest rebound of around $10 per ton for ferrous scrap grades appears to have stayed during the November domestic mill buying period, providing a little relief to processors who watched their inventory value decline throughout the summer.

But generators and processors continue to await a more significant rebound that would bring the value of prime scrap back to more than $400 per ton and benchmark obsolete grades closer to that threshold.

The October price uptick also was not the same from coast to coast in the U.S. According to the Raw Material Data Aggregation Service (RMDAS) operated by Pittsburgh-based MSA Inc., from Sept. 21 to Oct. 20, mills in the U.S. South paid $10 to $20 more per ton on average compared with mills in other parts of the U.S.

“Declines in U.S. interest rates should benefit consumer, manufacturing and construction activity [that], in turn, should lead to improved scrap supply flows.” – Tamara Lundgren, CEO, Radius Recycling

The RMDAS figures show mills in the South (Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia) paid an average of $398 per ton for No. 2 shredded scrap during the 30-day stretch compared with $383 in the North Central/East region and $377 in the North Midwest region.

A similar discrepancy was found in No. 1 heavy melting steel (HMS), where southern mills paid $356 per ton in late September and early October, $32 per ton higher than in the North Midwest and $23 higher than in the North Central/East region.

Southern mills also paid more for prompt scrap ($412 per ton) compared with their counterparts in the North Central/East region ($404 per ton) and the North Midwest region ($395).

Two significant storms that hit the South in rapid succession in September and October also could have temporarily interrupted the scrap supply chain in the region. Additionally, likely coming into play in late September were concerns surrounding port shutdowns as a union representing dockworkers at several ports conducted a strike that turned out to be short-lived.

Although export prices largely have been stagnant this year, bidding from Mexican mills and overseas buying near Gulf of Mexico ports in late September also could have helped boost southern scrap prices.

Bulk cargoes of shredded scrap leaving the Port of New Orleans increased from $346.75 per ton freight on board (FOB) Sept. 26 to $369.97 by Oct. 14, according to Davis Index.

Since then, Davis Index reports the Port of New Orleans price has drifted back down to $356 per ton.

Mixed Nos. 1 and 2 HMS export loads from New Orleans saw a similar price bump during the period, according to Davis Index, rising from $326.75 FOB in late September and temporarily peaking at $349.97 per ton FOB in the second week of October.

From Oct. 21 through Nov. 8, Davis Index maintained its calculation of domestically traded shredded scrap at $384 per ton, just $1 off from where RMDAS had the grade closing Oct. 20.

Davis Index is not portraying the Turkish market as a source of higher bids for obsolete scrap. Instead, it reports that at the close of the first full week of November, negotiations in that region decelerated because most ferrous buyers withdrew their offers given limited demand.

Earnings reports portray a steel sector with tight margins and disappointing demand compared with 2023.

Cleveland-Cliffs reported a third quarter 2024 loss of $230 million, citing weaker demand and pricing for its steel products. A few days before that, BlueScope, which operates a sizable scrap-fed mill in Ohio, revised its expected earnings downward.

Dismal summer ferrous values likely contributed to a $16 million net loss for Portland, Oregon-based Radius Recycling Inc. in its 2024 fiscal year fourth quarter (June 1 to Aug. 31). The company’s summer results equated to a $13 loss per ton of ferrous scrap processed.

Radius said flat ferrous selling prices continued to reflect the dampening effect of ongoing elevated levels of Chinese steel exports and subdued manufacturing activity in the U.S.

“Tight scrap availability has been our biggest headwind, and declines in U.S. interest rates should benefit consumer, manufacturing and construction activity [that], in turn, should lead to improved scrap supply flows,” Radius CEO Tamara Lundgren says.

“The structural demand for recycled metals remains strong, underpinned by the global transition to low-carbon technologies and demand from the anticipated increase in infrastructure investment."