Fall in More Ways than One

After a slight drop in September, ferrous scrap pricing experienced a much sharper plummet in the October buying period. In the United States, ferrous scrap prices dropped up to US$60 per ton in value, depending on the grade of scrap and the region of the country.

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

The October and September price drops combined put ferrous scrap prices almost exactly where they were back in July 2012, 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% 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).

A U.S.-based buyer of shredded grades says availability is definitely a concern for him. “There are companies operating shredding plants with 40,000 tons per month of capacity that are producing just 10,000 tons in recent months,” says the scrap buyer.

On the ferrous scrap demand side, in mid-October the Brussels-based World Steel Association (WorldSteel) released its outlook for steel consumption for the rest of 2012 and for 2013. This update of its April 2012 statement indicates that steel consumption growth is slowing down.

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

“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,” says WorldSteel Economics Committee Chairman Hans Jürgen Kerkhoff. “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,” he adds.

Industrial production and consumer purchasing figures from Europe back up Kerkhoff’s concerns. New passenger car registrations in Europe in September 2012 were down some 11% from September 2011 and an even more dramatic 24% from March 2012.

Momentum toward a rebound that may have been building earlier in the year seems to have fizzled out in the summer and fall of 2012.

Monthly crude steel production figures from WorldSteel for September 2012 show a drop that reflects the fizzling out of passenger auto demand. Whereas the EU produced some 15.67 million tonnes of steel in March 2012, September’s output of 14.10 million tonnes marks a 10% decrease in production.

For European scrap processors who export to Turkey (where steel mills supply building products used throughout the Middle East), WorldSteel says “recovery of steel demand in the MENA (Middle East and North Africa) region has been slower than expected due to continuing political instability.” However, that market continues to grow, with apparent steel use increasing by 4.9% in 2012, WorldSteel says.