Spring in the Market's Step

Prices that have continued to rise in the first four months of 2010 combined with winter’s end have improved ferrous scrap flows, recyclers are reporting.

“I’m glad to see it—it’s a nice surprise,” says an East Coast recycler of the flow into his company’s yard from mid-March to mid-April. “We knew the volume would improve once prices rose, but I’m a little surprised at how much and how quickly.”

A scrap recycler in the Great Plains states has experienced much the same thing. “Compared to what it was a month ago, flows have improved,” he remarks. “Not that long ago we began to see ground we hadn’t seen in a long time. In the last few weeks it’s filling up more,” the recycler says of his facility in late April.

A shredder operator contacted in mid-April says the auto body market remains competitive and increases in industrial scrap remain modest. But in looking at the pile to be fed to the shredder, he sees “old shelving, bicycles, lawn mowers, all kinds of stuff; it’s not predominantly appliances or any one thing in particular.”

The flow will feed into a ferrous scrap market with pricing that has been rising steadily, with the price for prompt grades nearing $500 per ton, according to the statistical summary of April spot buying from the Raw Material Data Aggregation Service (RMDAS), compiled by Management Science Associates’ (MSA), Pittsburgh.

April’s buying period was marked by significant regional disparities, according to RMDAS. Mill buyers in its North Central/East region (the New England states plus New York, New Jersey, Ohio, Pennsylvania, Kentucky, Maryland, eastern Virginia, West Virginia, most of Indiana and most of Michigan) paid an average of from $24 to $30 more per ton on the spot market, depending on the grade.

But meanwhile, in the North Midwest region (Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin and the northwest corner of Indiana) buyers actually paid less for No. 1 heavy melting steel (HMS) and the same for shredded scrap as they did in March.

The South region showed a pattern all its own, with spot buyers paying $34 per ton more for prompt grades but essentially the same as the March price for No.1 HMS and shredded scrap.

The East Coast recycler says in his part of the country some mill buyers kicked off April buying quickly and aggressively at prices named by recyclers. In the Midwest, meanwhile, Steel Dynamics Inc. may have held steady to the lower bids it was making, while in the South, Nucor was reportedly bringing in scrap from Europe to meet part of its demand. “I don’t know how that is cost-effective, with the euro so much stronger than the dollar,” the recycler comments.

Both the East Coast recycler and a scrap recycler in the Great Lakes region anticipate that the market is closer to equilibrium and they say they foresee pricing cooling down in May. “I think there is more scrap out there and the scrap market is higher than it needs to be,” says the Great Lakes region recycler. “Next month, things are going to adjust themselves.”

On the demand side, a report from the American Iron and Steel Institute (AISI) indicates that in February 2010, U.S. steel mills shipped 6.3 million net tons of product, a 4.1 percent decrease from the 6.6 million net tons shipped in January. Ideally, a shorter calendar month helps explain part of the difference.

Compared to conditions in 2009, the monthly figure shows a more encouraging 46.1 percent increase from the 4.3 million net tons shipped in February of 2009.

In terms of mill production, 1.75 million tons of raw steel were produced by mills in the United States the week ending April 17, 2010, for a capability utilization rate of 72.6 percent. That figure is higher by 1.4 percent than the one for the week before, when 1.73 million tons of steel were produced.

As with the monthly shipping figure, the weekly production figure is far greater than the 980,000 produced during the comparable April week in 2009 (an increase of 79.7 percent).

Globally, the World Steel Association, Brussels, has revised its forecast upward for steel demand in 2010 and 2011.

“WorldSteel forecasts that apparent steel use will increase by 10.7 percent to 1.2 billion metric tons in 2010, after contracting by 6.7 percent in 2009,” the organization states in a news release. “With these projections, world steel demand in 2010 will exceed pre-crisis levels of 2007,” according to the organization.

(Additional information on ferrous scrap, including breaking news and consuming industry reports, can be found at www.recyclingtoday.com.)