Steady or Sluggish?

As much of the country endured a heat wave in July, ferrous scrap prices reacted by staying virtually motionless, shifting by only a few dollars per ton compared with the month before.

Steel mill buyers of ferrous scrap on the spot market continued to pay more than $500 per ton for prompt grades in July, according to the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh.

National price averages for three of the largest grades tracked by RMDAS each increased by fewer than $5 per ton in July compared with June.

The prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) sold for $512 per ton during the July buying period, up just $4 compared with June.

Spot buyers of No. 2 shredded scrap paid an average of $451 per ton in July (up $3), and buyers of No. 1 heavy melting steel (HMS) paid $416 on average (up $3).

Regional variations on these price averages were minimal. The single greatest price increase in July was the $9-per-ton increase paid by spot buyers of No. 1 HMS in the RMDAS South region (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia).

Scrap recyclers continue to report flows of scrap that are steady if not spectacular. Manufacturing output figures in the U.S. are stable, though by no means surging.

Automotive factories in the U.S. produced fewer vehicles in June than in May, with overall U.S. factory production described as “flat” in a Federal Reserve report.

The Federal Reserve says factory production was unchanged in June, which followed a barely measurable 0.1 percent increase in output in May.

According to an Associated Press summary of the Federal Reserve report, auto production fell 2 percent in June, with the Japanese earthquake and tsunami continuing to have an impact. Several U.S. plants are having trouble getting component parts because of supply chain disruptions stemming from the March earthquake and tsunami.

The weak dollar continues to present a viable export market for many non-automotive U.S. manufacturers, according to the Federal Reserve Bank.

Unfortunately, construction figures in the U.S. also are stable, but at an activity level that remains slow in most regions.

“There is no getting around the fact this industry is stuck in a multi-year slump,” says Ken Simonson, chief economist of the Associated General Contractors of America, Arlington, Va. “The private sector isn’t growing fast enough to boost demand for new structures, while public construction budget cuts appear to be accelerating.”

Despite a slow economy, domestic steel production has held steady. The American Iron and Steel Institute (AISI), Washington, D.C., reports that in the week ending July 16, 2011, domestic raw steel production was nearly 1.9 million tons, with mills running at a capacity rate of 76.8 percent. That weekly figure is 11.6 percent higher than the steel making rate in mid-July of 2010 and also is up 1.7 percent from production the previous week.

The geography of domestic steelmaking is evident in the AISI’s regional breakdown of steel production in mid-July 2011. The AISI’s Southern region produced 631,000 tons of steel, followed by the Indiana/Chicago region’s 463,000 tons and 279,000 tons in the AISI Midwest region. The Pittsburgh/Youngstown region made 160,000 tons, followed by 112,000 tons in the Northeast Coast region; 108,000 tons in the Detroit region; 88,000 tons in the Western region; and 38,000 tons in the Lake Erie region.

The world’s steelmakers produced 127.7 million metric tons of steel in June, according to the Brussels-based World Steel Association (WorldSteel). That figure declined by more than 2 million metric tons compared with May. China’s steelmakers cut back production by about 300,000 metric tons in June, while European Union production fell by 600,000 metric tons.

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