Static Status Report

Equilibrium settled in for another 30 days in the ferrous scrap market, as pricing on the domestic spot market held steady in the U.S. in the May buying period.

According to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, U.S.-based steel mills paid nearly identical prices for the major ferrous scrap grades across all regions of the country.

No average price moved by more than $5 per ton in any of the three RMDAS regions, and the national averages for the three most commonly traded grades moved by $1 per ton or remained flat.

In the South region, the single biggest price swing was a $5 drop in value for the RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles).

In the North Midwest region, a $3-per-ton decline in No. 1 heavy melting steel dropped the average price to $399, creating the only average in any region below $400 per ton.

The output and order books for most steel mills have remained in balance, with sheet mills and pipe and tube mills running at high capacity, while mills that produce construction products continue to lag behind in output.

Volatility on the demand side, for the most part, is coming from the export market, where reduced orders can affect regional shipping patterns and pricing. The pattern thus far in 2012 has been for reduced demand in an export region one week to be met with increased demand elsewhere the next.

On the supply side, recyclers in many regions characterize generation as mixed. In the South, a ferrous scrap dealer says auto hulk scrap rates have been consistent throughout the year, as has industrial generation. Construction and demolition activity remains lackluster, with only spot projects occasionally generating plate and structural and other construction grades.

The pattern has been similar throughout 2012, the scrap dealer in the South says. “Most of my roll-off containers are out at plants and shops—I really don’t have many spotted at construction sites at all,” he comments.

National figures reflect these generation patterns, as the construction sector remains the U.S. economy’s weak spot, while vehicle sales are steady and the moving trend for industrial output is positive.

The Federal Reserve Bank reported in mid-May that industrial production advanced significantly in the month of April. The Wall Street Journal (WSJ) reported that factory, mine and utility output advanced 1.1 percent in April, “the strongest gain since December 2010.”

Economists contacted by WSJ said the increase was above their expectations and could be pointing to GDP growth in the U.S. that should be healthier in the final three quarters of 2012 compared with the first quarter.

Signals from economies in the rest of the world, including steel production figures, are not as positive. The Brussels-based World Steel Association (WorldSteel) has reported that global steel output declined by 4 million metric tons in April compared with March.

Steelmakers in China produced 60.6 million metric tons in April, 1 million metric tons of steel less than the month before.

Production also declined in April in Turkey—the largest U.S. scrap export market—as steelmakers there produced 2.9 million metric tons of steel, down from 3.1 million metric tons in March of this year.

Concerns about the economy of the European Union also are reflected in steel output in the EU’s largest nations. Germany’s 3.6 million metric tons of steel produced in April was down from 3.9 million metric tons made in March.

Output in Spain has remained static at 1.3 million metric tons in those two months, but the April 2012 figure is down by more than 14 percent from the amount of steel produced in Spain in April 2011.

Steel output in the U.S. in April was down only slightly compared with March, dropping from 7.8 million metric tons in March to 7.7 million metric tons in April.

Should steel production figures in the rest of the world continue to decline, domestic steelmakers may finally be able to buy their scrap at a price more to their liking.

May 2012 Spot Pricing

In the May buying period, ferrous scrap was sold on the spot market to domestic buyers at almost identical average prices as the 30 days before.

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.)