Across the board plunge

Following a slight drop in September, ferrous scrap pricing experienced a much sharper plummet in the October buying period, with the secondary commodity losing up to $60 per ton in value (depending on the grade and region).

Spot market transaction averages calculated by Pittsburgh-based Management Science Associates (MSA) for the Raw Material Data Aggregation Service (RMDAS) show that mill buyers on the spot market bought scrap for from $33 to $61 less per ton in the October buying period, which runs from late September through Oct. 20.

Looking at national averages, shredded scrap lost the most in value, dropping from $398 per ton in September to $344 in October—a $54-per-ton decline. Regionally, pricing held steadiest in the North Midwest region (consisting of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin, the Dakotas and the northwest corner of Indiana), where shredded scrap lost $40 in value, and No. 1 heavy melting steel (HMS) declined by just $33 per ton in price.

The October and September price drops combined essentially put ferrous scrap prices exactly where they were back in July 2012, right after the market experienced a similar tumble. October 2012 prices for three of the most commonly traded grades tracked by RMDAS (No. 2 shredded scrap, No. 1 HMS and the prompt industrial composite grades) are all within $6 per ton of their July 2012 average price.

On the generation side, a scrap processor in Pennsylvania estimates that scrap flows through his properties in September were probably down by some 20 percent in volume compared with the summer months of 2012.

Although he says the demolition and construction sectors did not contribute greatly to his volumes in the summer, what little those sectors did contribute has likely dried up for the next several late fall and winter months.

“In this part of the country, my peddler traffic tends to peak in the summer as well, so it’s hard for me to anticipate any kind of volume increase for the rest of 2012,” he comments.

As noted in the October 2012 issue of Recycling Today, more than 300 auto shredding plants are now installed in the United States, with that number having increased from closer to 200 only a decade ago. Conversations with shredder operators indicate that many plants are operating at reduced schedules that can include either fewer hours per day or alternating days during the week (or both).

On the ferrous scrap demand side, domestic steel industry production figures were showing signs of weakness as of mid-October. According to the American Iron & Steel Institute (AISI), in the week ending Oct. 13, 2012, domestic raw steel production was 1.74 million net tons at a capability utilization rate of 70.3 percent.

That is down from a production level of 1.78 million tons in the week ending Oct. 13, 2011, when the capability utilization was 71.9 percent.

The week of Oct. 13, 2012’s production level also marked a 1.2 percent decrease from the previous week (ending Oct. 6, 2012), when production was 1.76 million tons and the capability utilization rate was 71.1 percent.

Also in mid-October, the World Steel Association (Worldsteel, Brussels), released its outlook for steel consumption for the rest of 2012 and for 2013. This update of its April 2012 statement indicates slowing steel consumption growth.

Worldsteel forecasts that global apparent steel use will increase by only 2.1 percent in 2012, which it calls “considerably lower than the 6.2 percent growth achieved in 2011.” In 2013, global steel demand is being forecast by the organization to grow by 3.2 percent and to “reach a record high of 1.455 billion metric tons.”

Worldsteel Economics Committee Chairman Hans Jürgen Kerkhoff says,

“Earlier this year we were seeing some signs of recovery from the slowdown of the last quarter of 2011 and we expected a better second half performance in 2012. However, the economic situation deteriorated during the second quarter of this year due to continued uncertainty arising from the debt crisis in the euro zone and a sharper than expected slowdown in China. These factors have weighed heavily on business confidence and manufacturing activities around the world. As a result momentum in both the developed and emerging part of the world weakened considerably.”

Regarding the domestic steel industry, Worldsteel is not especially optimistic about 2013. “In 2013, steel demand growth will slow to 3.6 percent [and] apparent steel use will reach 135.1 million metric tons in 2013.”
 

October 2012 Spot Pricing

Ferrous scrap spot market pricing dropped significantly in October, with grades in some regions falling as much as $60 per ton.

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.)