Settling of Contents

After five consecutive months of declining prices—with some of those months featuring sharp drops—ferrous scrap prices held steady in December, with most grades trading in a very similar range to November’s.

For scrap recyclers heading into the new year, anticipation is focusing on whether prices will settle in and bump along at a new trading range well below $200 per ton or whether any factors can kick into place to revive prices in 2016.

Early December Midwest Index surveyed pricing collected by American Metal Market (AMM) showed No. 1 heavy melting scrap (HMS) losing 29 cents per ton in value in December, but the other two grades regained some value during early December trading.

Reflecting the lack of flow into auto shredder yards, AMM’s shredded scrap grade gained $3.74 per ton in value, trading at a higher price than the No. 1 busheling grade for the second consecutive month. Shredded scrap also widened its spread over the prompt grade, trading at an average of $4.16 per ton higher.

As measured by transaction pricing recorded by Pittsburgh-based MSA’s RMDAS (Raw Materials Data Aggregation Service) methodology in November, the southern United States was an exception, with consumers offering an average of $10 per ton more than shredded scrap.

In the other two RMDAS regions (North Midwest and North Central/East), however, shredded scrap sold from $2 to $6 per ton more than prompt grades.

Through mid-December little to no severe winter weather had occurred to temper scrap flowing into processing yards. Rather, the steep drop in ferrous scrap pricing and the steady drop in copper and aluminum scrap prices have pinched flows across retail scales and throughout the supply chain.

“Scrap flows are down in the Midwest about 40 percent, I would say, overall from what I have heard,” says a processor who buys scrap from smaller dealers in the Midwest.

The drastic conditions are causing an industrywide shakeout, resulting in idled yards and corporate bankruptcies. “All of our customers, at least the big companies with many yards, are all saying that business is very poor,” says the Midwest recycler. “Layoffs and yard closings are the norm right now.”

Publicly traded scrap companies have idled facilities to improve their balance sheets and to demonstrate to shareholders that they are reacting to the current market.

Sims Metal Management, with corporate offices in Sydney and New York City, issued a profit warning in late November for its upcoming financial quarter and said it would eliminate as many as 800 jobs and cut back operations or idle as many as 35 of its 270 facilities globally.

While tight supply may help ferrous scrap prices from falling further, any upward pressure from increased demand from domestic steelmakers does not seem to be at hand, according to data from the American Iron and Steel Institute (AISI), Washington.

In the week ending Dec. 12, 2015, domestic raw steel production was 1.54 million tons, down 14.4 percent from the comparable week in December 2014. As of mid-December 2015, the nation’s steel mill operating capacity rate was 64.2 percent, down from 74.6 percent in mid-December 2014.

With 2015 nearly in the books, the year-to-date AISI steel production statistics for the U.S. were not favorable at 83.86 million tons as of Dec. 12, 2015, down 9 percent from the 92.12 million tons produced during the same period in 2014.

The U.S. steel industry’s average operating capacity rate dropped from 77.5 percent in the first 50 weeks of 2014 to 71.4 percent in 2015.

The organization touted some potential good news in late 2015 in the form of two helpful pieces of legislation from the U.S. Congress.

“Scrap flows are down in the Midwest about 40 percent, I would say, overall from what I have heard.” – Midwestern U.S. scrap recycler

In early December a Senate and House joint conference committee agreed on a unified version of the Fixing America’s Surface Transportation (FAST) Act that was later signed by President Obama. AISI called it “the first long-term transportation bill to be passed by Congress in 10 years.”

AISI President and CEO Thomas J. Gibson said, “The steel industry is an important supplier to road, bridge and transit builders. This long-overdue legislation will enable steelmakers and our customers to plan for the future as the bill provides an increase in current investments levels—estimated at 15 percent for road, highway and bridge projects, and 20 percent for transit programs.”

Several days later, Gibson and AISI thanked the House of Representatives for passing another joint Senate compromise bill, this one for the Trade Facilitation and Trade Enforcement Act, which AISI called “a long-standing priority focus for steel as it provides the domestic industry with new tools to address the evasion of antidumping (AD) and countervailing duty (CVD) orders.”

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.

Additional RMDAS (Raw Material Data Aggregation Service) pricing from Pittsburgh-based Management Science Associates (MSA) is available on the Recycling Today website at www.RecyclingToday.com/RMDAS.