Tempered spring fever

While in years past the arrival of spring often brought with it a renewed interest in domestic and overseas ferrous scrap demand and better pricing, few recyclers are placing the spring of 2014 in that category.

In parts of Colorado and Wyoming, recyclers could not even herald the arrival of spring as of May 12, when nearly a foot of snow fell on Denver and other parts of those two states.

Static-to-falling scale prices and hit-and-miss revivals in the construction sector are among the factors recyclers cite for tempered scrap flows during April and early May.

“Business is OK but nothing great,” says one Midwestern recycler. “Our dealer business has slowed and stayed slow,” he adds, noting that recyclers he talks to in his region “are still crying that their yards are not doing anything” similar to the volumes they enjoyed before the recession set in.

A ferrous scrap buyer in the Great Lakes and Ohio Valley regions reports flows that are slightly better, though he says he is not happy to be buying into a falling market for prices. “Flows are better and business is better, but there is no good market news,” he says. “Prices have come down, and it looks like they might continue to slide. More scrap into yards means mills pay us less.”

The buyer comments that “shred was the weak sister” in May, and he says he is not optimistic that prices for ferrous shred or other grades will rebound soon. “I see this trend continuing for one, two or even three more months.”

A ferrous buyer in the Southeast also says he is seeing improved flows but has concerns about other aspects of the market. “Scrap flows [in May] are about 10 percent higher than they were in March or April,” he comments.
 

Although processors and economic developers in the Southeast have been investing to improve ferrous scrap export shipping options, overseas demand is currently lackluster in Florida and Georgia. “The domestic market has been $30- to $40-per-ton higher than export,” notes the buyer. “I believe we have a ways to go before we reach parity,” he adds.

Transaction data collected by American Metal Market (AMM), Management Science Associates’ RMDAS (Raw Materials Data Aggregation Service) and MetalPrices.com bears out the tilt toward weakening demand and slightly greater supply.

MetalPrices.com reporter Mike Marley reported in mid-May that “only a single cargo was bought from a U.S. Gulf Coast exporter” in May and that “Turkish mills have been buying scrap from European yards instead.”

In part because export markets receded again in May, domestic mills were able to negotiate lower May purchasing prices. In other cases, according to AMM, some domestic mills sat on the sidelines in early May in anticipation of paying even less for ferrous scrap in June.

Midwest Index prices established by AMM in mid-May pointed to ferrous scrap falling by more than $13 per ton compared with April, while prime scrap fell by just $1.50 per ton and No. 1 heavy melting steel (HMS) fell by nearly $10.

The difficult May for ferrous scrap helped re-establish a wider margin ($14 per ton) between prime scrap and shred. In the first four months of 2014, the two grades had spent much of the time with a narrow price margin between them.

Slight peaks and dips continue to define steel output in the U.S. as portrayed by data collected and published by the American Iron and Steel Institute (AISI), Washington.

In the week ending May 10, 2014, steel production at U.S. mills was 1.84 million tons at a mill capacity rate of 76.6 percent. That is only 0.5 percent greater than the 1.83 million tons produced in the week ending May 10, 2013.

The May 10, 2014, output level was up 1.5 percent from the previous week (the one ending May 3, 2014) when production was 1.815 million tons and the mill capacity rate was 75.5 percent.

Flatness (or stability) also is reflected in the AISI’s year-to-date figures, which show 33.9 million tons of output through May 10, 2014, compared with the 34.19 million tons produced during the same period of 2013, a decline of 0.8 percent.

Globally, the world’s steelmakers in 2014 continue to produce more steel nearly every month and quarter, with early 2014 proving no exception. According to the Brussels-based World Steel Association, the 405.7 million metric tons of steel produced globally in the first quarter of 2014 represented a 2.5 percent increase compared with the 395.9 million metric tons produced in the first quarter of 2013.

Despite nearly every economic and steel industry analyst in China and beyond saying that nation has a severe steel mill overcapacity problem, China’s output continues to grow, reaching 70.25 million metric tons in March 2014.

The more than 202 million metric tons of output in China in the first quarter of 2014 marks a 2.4 percent increase compared with the first quarter of 2013, despite the stated intention of China’s government to retire older steelmaking capacity.

The American Metal Market (AMM) Midwest Ferrous Scrap Index is 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 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 detailed methodology is available at www.amm.com/pricing/methodology. *FOB New York, in metric tons; **FOB Los Angeles, in metric tons.