Downward Motion

After gaining value during the last month of 2011 and the first month of 2012, pricing in the ferrous scrap market fell back in February, dropping by about $30 per ton for most grades in most regions.

According to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, prices paid by mill buyers for the prompt industrial composite grades in the February buying period (the first 20 days of February) fell most sharply.

In the South region (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia), prompt grades fell by $56 per ton in February compared with the month before.

The RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) also fell in value in other regions—by $49 per ton in the Midwest and a comparatively lower $37 per ton in the North Central/East region.

The downward motion of prompt grades caused them to fall below $500 per ton in February after having broken through that price ceiling the month before. Shredded scrap fell almost uniformly in value in February across all three RMDAS regions, within a $30-to-$32-per-ton range.

On the scrap demand side, in the week ending Feb. 18, 2012, domestic raw steel production was 1.94 million tons, putting production at a capacity rate of 78.6 percent, according to the American Iron and Steel Institute (AISI), Washington, D.C. That figure represented a 0.7 percent increase from the previous week (ending Feb. 11, 2012), when production was 1.93 million tons. The figure represents a larger increase from the 1.78 million tons produced in the week ending Feb. 18, 2011, when the capacity rate was 75.4 percent. The current week’s production versus the comparable week in 2011 represents a 9.1 percent increase.

The export market is proving much less stable in the early part of 2012. Figures from the World Steel Association (WorldSteel, www.worldsteel.org) indicate the world’s steelmakers produced 7.8 percent less steel in January 2012 compared with January 2011. Producers in global production leader China were off by 13 percent in January 2012 compared with one year earlier.

Historically there often is a rebound in steel production in January after many mills ease back their schedules in December. But in January 2012, the global production figure stayed essentially flat with where it was the month before, at 117 million metric tons of production.

Turkey remains a bright spot in the market for ferrous scrap exporters. That nation’s steelmakers produced 3.1 million metric tons of crude steel in January 2012, a total some 14.4 percent higher than the January 2011 production figure.

Scrap buyers in Turkey will continue to watch the euro-versus-dollar aspect of the currency market as they seek out supply. Provided ferrous scrap is available in Europe, demand there will be lighter, based upon January steel production figures.

According to WorldSteel, the EU 27 nations produced 5.6 percent less steel in January 2012 compared with January 2011, with considerable drops in output in Spain, the United Kingdom and Belgium.

On the scrap generation side, a Midwestern recycler expressed concern that the February drop in ferrous prices may cause a decline in auto bodies heading into shredder yards. He characterized demolition scrap flow as “intermittent” and usually dependent on one or two major projects rather than any genuine rebound in demolition and construction activity.

Across-the-scale retail traffic remains healthy because of strong nonferrous prices, which brings in “loose tin and some iron and steel odds and ends,” according to the recycler.

The U.S. auto industry continues to supply good news relative to the supply and the demand side of the ferrous scrap market. Auto sales in January 2012 hit their highest rate since 2008, as reported by the AFP news service, which based its report on figures collected by the Autodata information service.

Total passenger vehicle and light trucks sales rose 11.4 percent compared to January 2011, according to Autodata, putting the annualized sales pace at 14.18 million vehicles. While that doesn’t match the 16 to 17 million vehicles sold several years ago, it continues a positive trend from the low point reached in 2009.

Domestic automaker Chrysler enjoyed a particularly good January, with its sales 44 percent above its January 2011 monthly figure.

February 2012 Spot Pricing

After two months of gaining value on the spot market, ferrous scrap prices fell about $30 per ton in the February buying period.

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.

(Additional information on ferrous scrap, including breaking news and consuming industry reports, can be found at www.RecyclingToday.com.)