Reverse gear

After a June buying period that offered hope to scrap recyclers that ferrous pricing might rebound, the rest of the month and early July brought about the return of discouragement.

RMDAS (Raw Material Data Aggregation Service) pricing, which was calculated June 20 by MSA Inc., Pittsburgh, showed an increase in ferrous pricing, with shredded scrap reaching $294 per ton.

But by the time American Metal Market (AMM) issued its survey-based pricing for the period through July 10, its Midwest Pricing Index for shredded scrap settled at just under $264 per ton.

A lack of interest from overseas buyers continued to receive much of the blame from recyclers, and AMM’s East Coast and Export indices in June portrayed weak demand from lackluster markets in Turkey and East Asia.

From June 8 to July 10, AMM’s index price for No. 1 and No. 2 heavy melting steel (HMS) exported off the East Coast fell by $36 per ton, while its West Coast index price fell by $27 per ton.

Recyclers contacted in mid-July are skeptical that the remainder of summer 2015 will offer better news in terms of pricing, though several of them say inbound flows were holding relatively steady despite the price reversals.

“Flow is respectable, and there are a normal amount of [seasonal] demolition jobs going on,” says one East Coast scrap recycler.

The same recycler, however, cites weak interest from overseas buyers as having an impact. “Overseas inquiries are minimal,” he remarks. “The Indian container market is quiet and uncompetitive, and the Turkish market has dropped more than $30 from the June sales price.”

The demand side also was troubling to a processor in the Southeast. “Domestic mills had somewhat limited buys,” he says of the early July buying period. “Many did not buy their full complement of scrap, thinking the August market might be weaker yet.”
 

He describes scrap flows in the Southeast as off by 10 to 15 percent compared with one year ago, with lower scale prices beginning to have an impact. “For lower echelon suppliers (scavengers), the price is too cheap to get out there to work the market,” he comments.

A scrap buyer in the Midwest says steel mills are having a hard time getting finished steel price increases to stick because of low-cost imported steel, and ferrous scrap prices are unlikely to rise under those circumstances. “I don’t see any light until next year; 2016 might be better, but 2015 is a write-off already,” he comments.

The Midwesterner continues, “We fight to keep margins, we fight to keep customers, we fight to get mills to step up pricewise—this business is not fun.”

The recycler in the Southeast is unwilling to go that far in his portrayal of the market, saying, “It’s not good news all the way around, but the market is not a total disaster.”

Statistics gathered by the American Iron and Steel Institute (AISI), Washington, continue to point to a domestic steel industry with furnaces that are not churning out steel at the same pace they were in 2014.

In the week ending July 11, 2015, steel production in the U.S. was 1.74 million tons at a mill capacity rate of 72.8 percent. That is a 9.1 percent decrease from production of 1.91 million tons one year earlier in the week ending July 11, 2014, when the capacity rate was 79.6 percent.

Year-to-date production through July 11, 2015, stands at just under 47 million tons, down some 7.6 percent from the more than 50.8 million tons produced through July 11, 2014. The year-to-date capacity rate has fallen to 72.4 percent from 77.6 percent through July 11, 2014.

Figures gathered by the World Steel Association (Worldsteel), Brussels, for the first five months of 2015 also point to weakening steel production globally.

Through May of 2015 in the 65 nations reporting to Worldsteel, total steel output was 139.3 million metric tons, a decline of 2.1 percent from the 142.3 million metric tons churned out in the first five months of 2014.

The world’s largest steel producer, China, is among the nations making less steel, with its output down 1.7 percent in the first five months of 2015 compared with 2014. Nonetheless, steelmakers in many other parts of the world, including the U.S., say further capacity cuts are needed in China as its excess steel is being exported at prices producers in North America or Europe cannot match.

AISI praised two trade initiatives President Obama signed in late June as necessary steps in stemming the perceived tide of imported steel: the Trade Promotion Authority (TPA) and the extension of the Africa Growth and Opportunity Act.

AISI President and CEO Thomas J. Gibson says, “We thank the administration for recognizing the critical role of the steel industry by supporting these initiatives to improve the effectiveness of our antidumping and countervailing duty laws.”

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 detailed methodology is available at www.amm.com/pricing/methodology.html. 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.html.