Still losing value

The summer of 2015 did nothing to turn up the temperature on the ferrous scrap market in the United States, as late August and early September transactions revealed prices that continued to drop for all grades in all regions.

Monthly figures released Aug. 20 by MSA Inc., Pittsburgh, which calculates RMDAS (the Raw Material Data Aggregation Service) pricing, showed prompt, shredded and No. 1 heavy melting steel (HMS) grades all dropping from $21 to $36 per ton, depending on the region.

Three weeks later, when American Metal Market (AMM) released its index figures covering the first 10 days of September, several more dollars per ton were shaved off prices for AMM’s three Midwest Ferrous Scrap Index grades.

By mid-September mills were paying as little as $218 per ton for No. 1 HMS, about $230 for shredded scrap and slightly less than $235 for the No. 1 busheling grade, per the AMM Midwest Index averages.

Per-ton pricing is even lower for ferrous scrap processors selling into the export market, as measured by the East Coast and West Coast Indexes calculated by AMM for the late summer period.

As of mid-September, AMM’s West Coast Index had been stuck for more than a month at $198 per ton for HMS No. 1 and No. 2 blended shipments. East Coast recyclers were faring a little better, with the value having dropped to $201 per ton in early September.

Prices that continue to move downward are harming scrap flowing into yards by keeping many scavengers out of the game, recyclers say. If there is any good news, it might be that flow has stabilized or is not decreasing further since the peddler traffic has been missing for several months in a row.

A recycler on the East Coast describes late summer scrap flows as “normal and steady relative to our averages over the past year.” Unfortunately, he adds, these now typical flows “are off 20 percent from the year before.”

In late summer 2014, mills were still paying $400 per ton for prompt grades and more than $380 for shredded scrap, allowing processors to offer much more generous scale pricing.

This “new normal” of obsolete scrap flows remains a challenge, according to a Midwestern recycler and scrap buyer. “Flows were down across the board,” he says of the summer months at his yards. “Fewer people are recycling through retail channels, and people who can afford to hold back some scrap seem to be doing so,” he adds.

The summer 2015 construction and demolition season gets mixed reviews as a steady source of scrap generation. The East Coast recycler calls demolition scrap flows “average” for the summer of 2015 and says there was “not much construction” in his region.
 

The health of the North American steel industry and a global steelmaking capacity situation that appears to remain out of balance continues to suppress steel, iron ore and ferrous scrap pricing.

An ongoing lack of interest from export brokers and a domestic steel mill capacity rate that is stuck in the 73 percent range has meant that even with reduced flows, scrap processors are not seeing a bidding war for their monthly output.

The East Coast recycler says he witnessed tepid demand from domestic mills in early September and disappointing offers from export buyers. “There were reduced buys at mills in Pennsylvania and at the Gerdau mills in Virginia,” he remarks. Thus, he adds, a lot of his scrap went by rail to mills or brokers in the Midwest or deeper in the South.

He says making “sideways” September sales to American buyers was better than waiting for higher bids from overseas, which again did not materialize. After seeing initial export bids that he says were “of no interest,” he left that part of the market to “late sellers” who might not have had other options.

The Midwestern recycler also reports tepid demand from domestic mills. “Every month now we are dealing with ‘limited buys’ or ‘reduced programs,’ or at least hearing those phrases.”

Despite the slack demand and competition from material shipped by rail from the Atlantic Coast, the Midwestern recycler says, “we were able to move the tons we wanted to sell.”

Statistics gathered by the American Iron and Steel Institute (AISI), Washington, show the 2015 struggles of the steel industry in the U.S. continuing into September.

In the week ending Sept. 5, 2015, steel output in the U.S. was 1.74 million tons, produced at a mill capacity rate of 72.8 percent. That is down almost 8 percent from the 1.89 million tons produced in the first week of September 2014, when the mill capacity rate was 78.6 percent.

Year to date through Sept. 5, 2015, U.S. mills have produced 60.9 million tons of steel at an average capacity rate of 72.6 percent. That is down 8 percent from the 66.2 million tons produced during the comparable time frame in 2014, when the capacity rate was 78 percent.

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.