Starting Off with a Bang

The year 2011 has started the way 2010 began—with ferrous scrap prices rising significantly. According to pricing survey data from the Raw Material Data Aggregation Service (RMDAS) that is compiled by Management Science Associates Inc. (MSA), Pittsburgh, prices for the most common ferrous scrap grades gained $60 to $70 in value in January.

RMDAS figures for the first 20 days of January show prices paid for prompt grades (new production scrap consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) gaining $65 per ton on average nationally, moving to just less than $500 per ton ($497) for the January buying period.

No. 2 shredded scrap (shred with above .17 copper content) also surged in value, with domestic mill buyers paying an average of $472 on the spot market in early January. That was an increase of $69 per ton over the month before, when the spot market was averaging slightly more than $400 per ton. Mills hungry for scrap also paid more for No. 1 heavy melting steel (HMS), with that price rising by $71 per ton to a national average of $434 per ton in the January buying period.

The price increases were fairly uniform across the three geographic regions as broken out by MSA, though spot buyers in the North Midwest (consisting of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin and the northwest corner of Indiana) experienced the smallest increases, including just $49 per ton for prompt grades.

Winter weather has caused supply interruptions in December and January. The weather conditions have ranged from unrelenting December rains on the Pacific Coast to unusually icy and snowy weather in the South to extreme cold temperatures in the Upper Midwest.

But by mid-January, higher scale prices and renewed access to snow-bound scrap reportedly increased flow. “We’re just crazy busy,” said a recycler in the North Central United States in late January, who reported on a Friday that trucks had been crossing the scale at a high-volume pace throughout the week.

Domestic buyers of scrap have remained in the market and may have stepped in with larger buys during the weeks when Chinese and Taiwanese buyers did not place orders so as not to have deliveries during the Lunar New Year holiday season.

One recycler on the Pacific Coast says he anticipates the return of Chinese buying, possibly even before the Lunar New Year (Feb. 3), as buyers there could make purchases pre-holiday to allow for the transit time to bridge the end of the holiday season.

Globally, steelmakers produced more steel in December of 2010 compared with the previous month, perhaps offering an encouraging sign for that industry after it experienced a production setback in November.

According to the World Steel Association (Worldsteel), Brussels, steelmakers in December produced 116.2 million metric tons of steel, an increase of more than 2 million metric tons compared with November.

The November figure had been down more than 3 million metric tons compared with the previous month of October, so December’s figure shows a significant partial rebound in steel production.

As the world’s largest steel producer, China can often play a role when the global figure changes. After a slight November drop in production, China roared back with a December output figure that was 1.3 million metric tons larger.

For the year 2010 overall, steelmakers increased their output by 15 percent over 2009 figures. North America showed the most dramatic rebound, with steelmakers surging from 82 million metric tons of output in 2009 to nearly 112 million metric tons in 2010—an increase of 35.7 percent.

By volume, Asia retained its dominant position by making nearly 900 million of the 1.41 billion metric tons of steel produced in 2010.

At the outset of 2011 in the United States, the signs of steel industry health are largely positive, according to the figures collected by the American Iron and Steel Institute (AISI). In the week ending Jan. 22, 2011, domestic raw steel production in the United States was nearly 1.77 million net tons while the capability utilization rate was 73 percent.

That figure is both higher than the week before (1.74 million net tons) and compared with the year-ago figure of 1.55 million net tons for the week ending Jan. 22, 2010.