Searching for rays of hope

DeAnne Toto

The month of February brought little in the way of good news for scrap recyclers. Ferrous scrap prices plummeted, with some grades falling by more than $100 per ton, and U.S. Steel and Vallourec Star announced production cuts related to the downturn in the oil and gas sector. Nonferrous scrap markets have yet to display much strength as of 2015, and then there are the labor issues plaguing ports on the West Coast, which are having repercussions not only for recycling companies and brokerage houses that ship material overseas but also for the wider economy.

Vallourec Star, which produces seamless steel pipes for the oil and gas industry, said it was temporarily idling its Youngstown, Ohio, operations for three weeks in the middle of February, while U.S. Steel said it was temporarily adjusting operations at its Lone Star Tubular Operations in Lone Star, Texas, and at its Fairfield Tubular Operations in Fairfield, Alabama. The company’s Fairfield Works plant, the primary flat-roll supplier of rounds to its Fairfield Tubular Operations, also adjusted its operations. The companies’ actions were in response to softening market conditions in the energy sector.

Regarding the decline in ferrous scrap pricing, traders and processors cite several factors, including soft export markets. Pricing for some ferrous scrap grades declined by 27 percent, depending on the region and the index used.

Nonferrous scrap markets are no more promising, with copper reaching $2.61 per pound for March contracts. As of early February, copper scrap prices had declined roughly 20 percent since December 2014, with some industry sources saying prices touched a three-year low in January in response to a combination of soft demand and reduced generation.

When it comes to the situation at West Coast ports, turn to the feature “Ports pileup,” beginning on page 96, for a review of how this labor dispute developed and is progressing as of mid-February. As of Feb. 19, cargo companies directly approached West Coast dockworkers, rather than going through the International Longshore men and Warehouse Union, with what they say is their “last, best and final” offer, according to an Associated Press article. However, even if a labor agreement is reached before March, a great deal of damage and expense already has been incurred by recyclers, retailers and other businesses.

Looking for a silver lining among the clouds currently hanging above the scrap industry landscape can be difficult right now. But, according to conversations that members of the Recycling Today Media Group have had with some individuals in the industry, the picture is not completely devoid of optimism. Many experienced operators with well-capitalized businesses say that if these market conditions persist, they can help to drive poor operators out of business, which will be good for the industry overall.