An Encouraging Start to the Year

Even without severe winter weather playing a major role, domestic steel mills paid up to $39-per-ton more on the spot market for ferrous scrap in January compared with December.

According to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, mill buyers paid an average of $34-per-ton more for shredded scrap in the January 2012 buying period, which includes the first 20 days of the month.

The price increases caused the RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) to rise to $516 as a national average, rising above $500 for the first time since October 2011.

The other two common ferrous grades summarized in the RMDAS report, No. 2 shredded scrap and No. 1 heavy melting steel (HMS), also moved up in price, but maintained a national average below $500 per ton in January.

By region, prices in the South—which had experienced the smallest gain in December—rose the most by average value in January. In the South (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia), each of the three major grades advanced by more than $30 per ton on the spot market, with No. 1 HMS rising $39 per ton.

Regarding scrap generation, a recycler near the U.S.-Mexico border manufacturing region says the generation of material remained hectic even through the holiday season, especially in the automotive sector.

The North American auto industry continues to enjoy a modest rebound, with some 12.8 million passenger cars and light trucks sold in the United States in 2011, up substantially from the doldrums of just 10.4 million vehicles sold in 2009. An analyst quoted by Forbes magazine in mid-January has forecast sales of 13.5 vehicles in the U.S. in 2012.

Any recovery on the construction side is even more restrained, as single-family housing in particular has yet to rebound after the mortgage industry collapse.

“There are definitely some conflicting trends when it comes to [construction] contractors’ expectations for 2012,” says Ken Simonson, chief economist of the Associated General Contractors of America (AGC), Washington, D.C. “The construction industry will improve this year, but we are going to have to wait until at least 2013 before contractors experience the kind of recovery this industry needs,” he comments.

A scrap recycler in the Northeast says that an unusually mild winter (as of mid-January) was helping to keep scrap flows steady, as have healthy scale prices for both ferrous and nonferrous scrap.

An export broker expresses caution as to what extent buying from China will resume after that nation’s New Year holiday break in late January. He notes that declines in real estate values are affecting municipal tax revenue streams in many parts of China—and thus creating questions about some of the metals-intensive infrastructure projects that create scrap demand in China.

A processor in the Midwest says that while spot prices offered by mills surged the first few days of January, by the middle of the month spot prices were softening considerably. He says he anticipates that most ferrous grades will drop by $20 per ton or more in the February buying period.

On the demand side, 2012 has started out on an encouraging note for North American steel mills. In the week ending Jan. 14, 2012, mills in the United States operated at 76.2 percent of capacity, according to the Washington, D.C.-based American Iron and Steel Institute (AISI, www.steel.org). That level is above the 2011 same-week rate of 73.2 percent but down slightly (0.4 percent) from the previous week.

Globally, figures from the World Steel Association (www.worldsteel.org), Brussels, showed a rebound in December 2011 after a somewhat troubling drop in production compared with the month before. The world’s steel producers manufactured more than 117 million metric tons of steel in December—historically a slower month—exceeding the November figure of just 115.5 million metric tons.

China’s renewed steel production was a major reason for the resurgence, as that nation’s production rose from 49.9 million metric tons in November to 52.1 million metric tons in December. North American steelmakers also rebounded (by about 250,000 metric tons of output, or about 2.5 percent).

European steelmakers, on the other hand, witnessed their second straight month of decline. After producing about 1 million metric tons less in November compared with October, they slumped by another 1.7 million metric tons in December.

 January 2011 Spot Pricing

In Janury, for the second month in a row, spot market buyers paid from $20 to $40 more per ton for ferrous scrap.

Reported regional aggregated spot market prices per gross ton shown for each commodity are based on all Management Science Associates (MSA), Pittsburgh, Raw Material Data Aggregation Service (RMDAS) participants’ actual order data submitted to and processed by MSA as of the 20th of each respective “buy month,” rounded to the whole integer. A map of RMDAS regions is available at http://rmdas.msa.com, as is a further explanation of RMDAS methodology and an accompanying disclaimer.

No. 2 shredded scrap is defined as containing 0.17 percent or greater copper content. The prompt industrial composite consists of an average of No. 1 bundles, No. 1 busheling and No. 1 factory bundles. Additional pricing information on each grade can be found at www.RecyclingToday.com.

© 2012 Management Science Associates Inc. All rights reserved RMDAS is a trademark of Management Science Associates Inc.

(More information on ferrous scrap, including breaking news, can be found at www.RecyclingToday.com.)