Pausing to reconsider

Ferrous scrap buyers in the United States (and in most export markets) declined to bid scrap prices up any further in early April, hitting the pause button after what had been four price rises in the previous five months.

Surveyed pricing reflecting the early April 2017 buying period, as calculated by American Metal Market (AMM), showed price drops for all three major grades tracked in the Midwest and a $33 per ton plunge in prices being paid by buyers bidding for East Coast scrap.

In AMM’s Midwest indices for April, the grade showing the most resilience was No. 1 busheling, which dropped by just $15 per ton compared with $35 per ton price drops for shredded scrap and No. 1 heavy melting scrap (HMS).

Exporters on the Pacific Coast experienced one of the only price increases in the market in early April, with the AMM West Coast index for No. 1 and No. 2 HMS rising by $7 per ton.

Although the drop in most prices marked a potential reversal in momentum, a recycler in the Southeast nonetheless expressed satisfaction with the market in that region, saying, “The Southeast is very strong compared to this time last year.”

Heartening to ferrous scrap processors throughout the U.S. has been the increase in scale traffic in the first quarter of 2017, helping restore volumes to a level closer to where they stood before the doldrums set in during late fall 2015.

“Sales volumes are above average,” says the recycler in the Southeast, adding, “Due to a mild winter, scrap flows into the yard are strong.”

The recycler says prices in the Southeast are on par with AMM’s Midwest index figures, commenting, “prices stand at $300 per gross ton for shred and $265 to $270 for HMS.” He says busheling in the Southeast is fetching $365 to $370 per ton, higher than pricing in the Midwest. Plate and structural scrap pricing is strong, the recycler says, at from $290 to $300 per ton.

Throughout the price rebound in the fourth quarter of 2016 and the first quarter of 2017, regional differences in the grades seemed to narrow, according to data collected by the Raw Material Data Aggregation Service (RMDAS) operated by Pittsburgh-based Management Science Associates Inc. (MSA).

The RMDAS March 2017 pricing, reflecting mill transactions between Feb. 20, 2017, and March 19, 2017, showed prompt grades priced in a narrow $3 per ton range in all three RMDAS market regions (South, North Midwest and North Central/East).

The No. 1 HMS grade likewise traded from $299 to $301 per ton in all three regions, and regional differences in shredded scrap prices in March were not much greater, with all three regions averaging within $6 per ton of each other.

Throughout the first quarter of 2017, only once was there a regional disparity of more than $7 per ton for the grade, according to RMDAS. That was in February 2017, when prices for prompt grades in the South spiked to $326 per ton, $15 more than what was paid in the North Midwest and $9 more than in the North Central/East.

As AMM’s pricing indicates, figures further away from domestic steel mill averages have been more common in the export market in 2017.

March 2017 saw a $33 per ton disparity between what recyclers on the East Coast could fetch for an exported blend of No. 1 and No. 2 HMS and the lower price received by exporters on the West Coast.

The volatile East and West coasts pricing likely is a reflection of movements in currency value, spot buying by overseas mills of U.S. scrap only when they need it and the varying conditions of overseas steel sectors.

Three of the major traditional overseas buyers (Turkey, South Korea and Taiwan) purchased less scrap in 2016 than they had the year before, while Mexico upped its purchases and India held steady in 2016. (For more on this, see “Back in Business,” by clicking here.)

The pause in price strength in the April 2017 buying period may have been tied more to conditions in the domestic steel industry, with U.S. output figures stalling in late March.

After the Washington-based American Iron and Steel Institute (AISI) reported a decrease in output during the week ending April 1, 2017, its report for the following week offered better news for recyclers. 

In the week ending April 8, 2017, domestic steel output was 1.7 million tons, marking a 0.7 percent increase from the previous week. The output figure for that prior week was noticeable for representing a 1.9 percent decrease in output from its weekly predecessor—a sharp reversal after more than two months of largely steady gains.

Year to date through April 8, 2017, U.S. steel output of 24.25 million tons is up by 3.8 percent compared with output during the same period in 2016. Mills in the U.S. are operating at a capacity rate of 74.3 percent in the first quarter of 2017, marking an increase over the 71.6 percent rate from the first quarter of 2016.

Additional RMDAS (Raw Material Data Aggregation Service) pricing from Pittsburgh-based Management Science Associates (MSA) is available on the Recycling Today website at www.RecyclingToday.com/RMDAS.

The American Metal Market (AMM) Midwest Ferrous Scrap Index is calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The AMM Scrap Index includes material that will be delivered within 30 days to the mill. Spot business included after the 10th of the month will not be included. The AMM Ferrous Scrap Export Indices are calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The detailed methodology is available at www.amm.com/pricing/methodology. *FOB New York, in metric tons; **FOB Los Angeles, in metric tons.