The Even Keel Continues

October spot pricing for ferrous scrap showed slight variations from September but stayed in the same narrow range in which it has been since April 2011. By late October, some recyclers were expressing concern about declining melting rates at domestic mills, but purchase prices seemed to indicate that demand has been sufficient enough to keep the market stable.

Data collected and a summary distributed by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, showed national averages in October staying with $6 per ton of the September figures.

The largest variation within the three RMDAS geographic regions was in the North Midwest region (Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin, the Dakotas and northwest Indiana), where mill buyers were able to pay $10-per-ton less for No. 2 shredded scrap.

(Per gross ton for No. 2 shredded scrap, defined as 0.17 percent or greater copper content)

Mills in that region were able to pay less for each of the three commonly traded forms of scrap tracked by RMDAS (No. 2 shredded, No. 1 heavy melting steel (HMS) and the prompt industrial composite grade, consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles.)

The only grade for which mills paid more in any given region was for prompt grades in the South, which gained $3 per ton in value.

The October pricing continues a pattern of stability that has been in place throughout most of 2011. The national average paid by mills for prompt grades has stayed within a $20 range between April and October.

The RMDAS prompt industrial composite price hit a high of $512 in June of this year, bouncing back from its recent low of $493 in May.

The $19-per-ton variation for a commodity that has averaged $502 per ton in the past seven months means prompt grades have never lost or gained more than about 3.8 percent of their value during that span.

A scrap processor in the Midwest indicates that flow has started to slow down somewhat in October. He attributes it in part to declining copper prices, which were causing some scrap generators and peddlers to hold onto all their scrap in the hope that the copper price would rebound soon.

Unlike ferrous scrap, copper pricing has demonstrated considerable volatility in a seven-month span. London Metal Exchange (LME) fixed cash settlement pricing for primary copper has moved from an average of $9,530 per metric ton in March down to $8,300 per metric ton as a September average.

Unlike ferrous scrap's 3.8 percent trading range, the LME copper price moved downward by 13 percent in seven months.

On the demand side, the same processor speculates that steel mills in winter weather regions may have reduced their scrap buys in October with the goal of suppressing the price of ferrous scrap before they have to make their pre-winter inventory buildup purchases.

Steel output in the United States took a dip in early October but regained momentum later in the month, according to the American Iron and Steel Institute (AISI), Washington, D.C.

In the week ending Oct. 15, 2011, domestic raw steel production was 1.86 million tons, with mills running at a capacity utilization rate of 75.1 percent. That figure is up 14.3 percent from the 1.63 million tons made during the same mid-October week in 2010, while the capacity utilization rate then was 67.3 percent.

The figure for Oct. 15, 2011, also increased 1.6 percent from the previous week (the week ending Oct. 8, 2011), when production was at 1.83 million tons.

The slight setback in early October was unwelcome in a calendar year where steelmaking in the United States has been gaining some momentum. According to an AISI summary of the first eight months of 2011, U.S. steel shipments totaled nearly 60.5 million tons, an 8 percent increase compared with 2010 shipments in the same time. At that output level, shipments from domestic steel mills would total 91 million tons at year's end.
 

October 2011 Spot Pricing

Stability was the most common trait for scrap prices for the seventh consecutive month, though with a slight downward tilt in October.

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.

© 2011 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.)