Downward Demand Curve

For the second consecutive monthly buying period, steel mills in the United States were able to purchase scrap for as much as $50-per-ton less on the spot market compared with what they had paid the month before.

According to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based Management Science Associates (MSA), prices for prompt industrial grades fell by an average of $50 per ton on the spot market, while shredded scrap lost $47 in value.

The net result of the two consecutive monthly buying periods is a drop in the value of shredded scrap of nearly $100 per ton—from $437 in May 2012 to $338 in July.

Average national per-ton prices in the buying period, which included the last 10 days in June and the first 20 days in July, fell below $350 per ton for all major ferrous grades.

Spot market prices in the North Midwest region (which consists of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin, the Dakotas and the northwest corner of Indiana) are the lowest on average among the three RMDAS regions.

Prices in the North Midwest finished the buying period with the RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) at $333 per ton, while No. 2 shredded scrap was valued at $328 and No. 1 heavy melting steel fell to $294.

The $294-per-ton price marked the first time a ferrous scrap average price for any grade in any region had fallen below $300 per ton since 2010.

Recyclers contacted in mid-July are reporting positive signs in the ferrous scrap market after 60 troubling days.

A scrap processor along the Atlantic coast says export buyers have begun making inquiries again and are offering prices above the U.S. mill sport market rate. He says the absence of export buyers has allowed domestic mills to bid down prices during the previous 60 days.

In the South, a scrap recycler says the calls from mill buyers and export brokers he is receiving in the third week of July were beginning to move “in the right direction.” He adds, “Each call I’m getting today, the price seems to move up by about $10 or $15 per ton.”

Steel mill output in the United States is beginning to demonstrate some signs of decline. According to the American Iron and Steel Institute (AISI), Washington, D.C., in the week ending July 14, 2012, domestic raw steel production was 1.84 million tons with a capability utilization rate of 74.6 percent. That production figure is down 1.4 percent from the previous week (ending July 7, 2012), when production was 1.87 million tons and the capability utilization rate was 75.6 percent.

Steel output in 2012 in the United States, however, remains above the 2011 level. Steel production in the week ending July 14, 2012, showed a 0.5 percent increase from the same period in the previous year. What the AISI calls “adjusted year-to-date production” through July 14, 2012, was 52.93 million tons with a capability utilization rate of 77.9 percent. That is a 6.3 percent increase from the 50.72 million tons made during the same period last year, when the capability utilization rate was 74.5 percent.

Global steel output figures for June, compiled by the World Steel Association (Worldsteel), Brussels, show some 2.5 million fewer metric tons of steel were produced in June compared with May. China was among the nations with less output in June. The nation’s steelmakers produced 60.2 million metric tons of steel in June, down from 61.2 million the month before.

Steel production in Europe also declined in June, falling by about 600,000 metric tons—a smaller volume than China’s decline but a higher percentage. The EU decline from 15.3 million metric tons in May to 14.7 million metric tons in June represented a 4 percent drop in output.

Comparing June 2012 with June 2011, global steel output was relatively stable, dropping to 127.90 million metric tons in June 2012 from 127.99 million metric tons in June 2011.

The monthly decrease, though mild, marks one of the few negative numbers in 2012, with much of the rest of the first half of the year having pointed to increased output.

“World crude steel production in the first six months of 2012 was 766.9 million metric tons, a slight increase of 0.9 percent compared to the same period of 2011,” the group states in its news release announcing the June 2012 figures. “North America and Asia showed an increase of 7.2 percent and 1.6 percent respectively (U.S. 8.4 percent and China 1.8 percent), while the EU and South America recorded negative growth of -4.6 percent and -3.5 percent each.”

July 2012 Spot Pricing

Spot market prices for the three major grades fell $42 to $50 per ton, marking the second straight month of decline.

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.)