Smaller Payday

The lack of volatility that had characterized the ferrous scrap market for six straight months gave way to a fairly sharp decline in the price domestic mills were willing to pay in the November buying period.

Spot market pricing figures collected through the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, show domestic steel mills paying from $30 to $45 less per ton for their scrap in the first 20 days of November.

The RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) dropped below $500 per ton for the first time since May of 2011, falling from $500 per ton in the October buying period to $455 per ton in November.

Mill buyers also were able to pay, on average, $30-per-ton less for shredded scrap and $29-per-ton less for No. 1 heavy melting steel (HMS) scrap in November compared with the month before. Spot buyers in the South region paid, on average, slightly higher prices for scrap than buyers did in the other RMDAS regions.

In the South, mill buyers paid $5-per-ton more for prompt grades compared with buyers in the North Midwest. The average spot buying price for No. 2 shredded scrap in the South was $3-per-ton more than the national average and $13-per-ton more than in the North Midwest. No. 1 HMS scrap in the South fetched $19-per-ton more than was paid in the North Midwest region.

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

A scrap recycler based in the Midwestern United States says the lower ferrous prices, in combination with copper prices that had dropped earlier in the fall, will likely slow down inbound flows to scrap yards. Some generators who follow pricing patterns, this recycler predicts, will count on weather interruptions and declining mill inventory positions to eventually work in tandem to create stronger ferrous prices in the winter months.

On the demand side, Chinese government ministers and university professors who spoke at two industry conferences in November portrayed a strong continuing demand scenario for scrap metal in China.

For the second consecutive year, China's 12th Five-Year Plan, which begins in 2012, was the focus of comments from several government ministers who addressed the Secondary Metals International Forum, organized by the China Nonferrous Metals Industry Association Recycling Metal Branch (CMRA). The conference was in early November in Guangzhou, China.

Speaker Li Xinmin of China's Ministry of Environmental Protection (MEP) said Chinese president Hu Jintao has set as national priorities to "reduce pollution from the source and develop the circular economy," a point of view that may ultimately work in favor of scrap-fed electric-arc-furnace (EAF) steelmaking technology.

Of more immediate concern to ferrous scrap recyclers, at a session at the World Recycling Forum, held in Hong Kong in mid-November, Scott Horne, general counsel of ISRI (the Institute of Scrap Recycling Industries Inc.), Washington, D.C., said a government official in Beijing had conveyed to him that shredder operators in China's Jiangsu province had been granted permission to import flattened auto hulks.

The policy change was confirmed by scrap recycler and equipment manufacturer Scott Newell of The Shredder Co., Canutillo, Texas, and scrap recycler Michel Dubois of Luxembourg-based Recylux Group, both of whom told attendees they had seen evidence of the new policy.

Dubois said that in Europe he had witnessed trailer loads of flattened autos "being loaded into bulk vessels and shipped directly to China." Dubois added, "It is being imported as iron scrap; this is a fresh idea."

Newell commented that four different shredder locations in China's Jiangsu province each had received licenses to import up to 400,000 tons per year of auto hulks. "I think it's a mistake to think this is not going to happen," he said.

ISRI's Horne confirmed that an AQSIQ (Administration of Quality Supervision, Inspection and Quarantine) official in Beijing had handed him a notice "that clearly indicates it's legal to import flattened or baled autos." Horne remarked, "That was a huge surprise."

Newell said the shredder operators in Jiangsu province, some in the city of Zhangjiagang and some of them Shredder Co. customers, were feeding the hulks to their shredding plants. The same companies were now operating "very sophisticated systems" to remove nonferrous metals from the auto shredder residue (ASR), he added.

November 2011 Spot Pricing

After several months of stability, prices received by shippers dropped from $30 to $45 per ton in the November buying period.

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.)