Same As It Ever Was

The first two buying periods of 2013 have not produced dramatic changes in value, though many processors in North America were likely disappointed that February buying did not bring with it any supply- or weather-related price rises.

According to the “American Metal Market” Midwest Scrap Index for the early February buying period, shredded scrap lost about 3 percent in value, declining from $386 per ton to $375.

The publication reports that mills were making offers in late January down by as much as $20 per ton for February buys, but adds that increased bidding activity in early February helped prevent the drop from becoming that steep.

After the fourth quarter of 2012 brought with it a disappointing decline in GDP, a better mood seemed to emerge in late January and early February. Economic indicators in several different parts of the world have provided some reasons for optimism, including indicators related to construction activity in the United States and manufacturing activity in China.

However, statistics from the American Iron and Steel Institute (AISI), Washington, D.C., do not point to this translating into an immediate gain for the steel industry. Steelmakers in the United States produced 1.8 million tons of steel in the week ending Feb. 2, 2013. That figure is down 7.4 percent from the 1.94 million tons produced in the comparable week of 2012.

Even compared in back-to-back weeks, output in the U.S. did not gain momentum, essentially staying flat relative to output the week before.

As of early February, recyclers in several different parts of the country are reporting tepid domestic demand as steel mills in the U.S. operate at about 75 percent of capacity.
 

Writing for the Bureau of International Recycling (BIR) “World Mirror” January 2013 Ferrous Metals report, Blake Kelley, who trades for Sims Group from its East Coast office, says exports to South Korea and Taiwan have continued from the U.S. in early 2013.

Kelley also reports that scrap imports in China began to increase in November 2012 (up 15 percent compared with November 2011) and “raw steel production increased 2.3 percent in the first 10 days of January from the prior period to an annualized rate of 710 million metric tons.”

China’s role as a global economic engine appears to be intact, as the nation reported that its exports in January 2013 were up by 25 percent compared with a year earlier and that its imports rose by more than 28 percent.

Ideally, the figures point to a healthy amount of buying and selling taking place around the world, if household consumers in the U.S. and Europe are the ones purchasing the exported goods.

For U.S. ferrous scrap recyclers seeking more supply and greater domestic steel mill demand on the sell side, the construction industry has long been the laggard holding the sector back.

Figures from the U.S. Department of Commerce, summarized by the Associated General Contractors (AGC), Arlington, Va., point to a rebound that finally may be gaining momentum.

“Revised government data issued [Feb. 1, 2013] show the construction industry is contributing substantially to economic and employment growth,” the AGC remarks in its news release summarizing recent data.

AGC says construction employment in January 2013 rose for the eighth consecutive month and construction spending in December increased for the ninth month in a row. Both totals equated to the highest levels in more than three years.

“The steady rise in construction spending since last March suggests contractors will be hiring even more workers in the months ahead,” says Ken Simonson, chief economist of the AGC.

Construction firms employed 5.73 million people in January, a gain of 28,000 from December and of 102,000, or 1.8 percent, from a year earlier, Simonson says.

The difficult task facing the nation’s political parties is made clear in the AGC’s remarks as to what could stop the momentum. At the same time the federal government is being asked to balance its budget, the AGC warns that spending cuts bring with them a likely decrease in infrastructure spending.

AGC CEO Stephen E. Sandherr warns that “the rosy outlook could be undermined if public officials do not begin to increase investment in construction.” The AGC is urging Congress to avoid an abrupt slowdown in federal funding that would occur if an across-the-board spending sequestration or a government shutdown occurs in March.

“Instead of making short-sighted cuts in programs to provide flood protection and clean water systems, Washington officials need to find a way to address out-of-control entitlement spending,” Sandherr says. “And we must continue to give the private sector the kind of stability and certainty it needs to thrive.”
 

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/Default.aspx.

*FOB New York, in metric tons; **FOB Los Angeles, in metric tons. The American Metal Market (AMM) Midwest Ferrous Scrap Index and 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 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 detailed methodologies are available at www.amm.com/pricing/methodology.html. The grades are based on the Institute of Scrap Recycling Inc. (ISRI) specifications from 2012.