Supply and demand balance remains contentious

Tension in the ferrous scrap market continued into March, with severe weather, fluctuating export demand and uncertainty about steel demand in the United States contributing to a market that’s proven difficult to forecast.

As of early March, processors contacted by Recycling Today described late-winter inbound scrap flows as extremely dependent on regional weather scenarios.

“In the West, flows have been constricted by heavy rain and snow; in some cases, these have been 1,000-year events that dramatically reduced flows,” a processor in that region says of supply.

The reverse of that scenario has been playing out in the Midwest, where a processor indicates record warmth and lack of snow have increased flows dramatically. In some locations, he says flows are up more than 25 percent.

“The demand for material off the West Coast has been decent— definitely higher than supply in the region.” – Western U.S. scrap processor

MSA Inc.’s Raw Material Data Aggregation Service (RMDAS) pricing from Jan. 20 to Feb. 19 shows shredded scrap held its value during that period better than some other commonly traded grades.

Mills in the U.S. paid just $5 per ton less for the No. 2 shredded grade in February. Meanwhile, the RMDAS prompt industrial composite grade lost $19 per ton in value and No. 1 heavy melting steel (HMS) dropped by $11 per ton.

“Shredder feedstock appears to be tight in most regions,” another processor says. “Shredders have been struggling to compete on that grade.”

Reinforcing the regional differences, while shredded scrap held its value in the RMDAS North Central/East region, it lost $2 per ton in the North Midwest and dropped by $12 per ton in the South.

No. 1 HMS, a frequently exported grade, suffered its biggest drop in the domestic mill-dependent North Midwest region, losing $17 per ton in value in late January and the first few weeks of February.

In the North Central/East and South regions, with greater availability to export docks, No. 1 HMS dropped by $10 per ton in the South and $9 per ton in the North Central/East.

Heading into the spring, processors’ inbound flows and profit margins will depend on price trends involving domestic mill demand and overseas interest in U.S.-generated ferrous scrap.

The Washington-based American Iron and Steel Institute (AISI) reports U.S. steelmakers made 3.8 percent less steel through March 2 compared with the same time frame in 2023.

Another troubling sign could be the AISI steel output figure for the week ending March 2, which was down by 0.6 percent from the prior week. That news came out just as a construction trade group reported a 0.2 percent dip in construction spending in the U.S. in January compared with the month before. Ken Simonson, chief economist of the Arlington, Virginia-based Associated General Contractors, says the dip is more likely because of bad weather than weakening overall demand.

Overseas ferrous scrap buying patterns have been similar to domestic conditions, according to reports from metals information and pricing service Davis Index. For example, in the first full week of March, a Turkish bidder was able to buy U.S.-origin mixed Nos. 1 and 2 HMS scrap for about $8 per ton less than other recent transactions.

Davis Index also reports U.S. mills in early March were asking for steep discounts on their monthly scrap buys for the third time in three months. Mill buyers were asking to pay $70 per ton less for prime grades, some $50 per ton less for shredded scrap and about $40 per ton less for HMS or for plate and structural (P&S) purchases.

Ferrous scrap shippers likely would portray such prices as a one-time discount, since ratcheting down scale prices would almost certainly lead to a considerable drying up of obsolete grades such as shredded, HMS and P&S heading into April and May.

Exporters on the West Coast, where scrap was hardest to find in early March, could have a counterpoint to offer in early spring.

“The demand for material off the West Coast has been decent—definitely higher than supply in the region,” another processor based in the West tells Recycling Today.

Mexico is a potential bright spot for ferrous shippers, with positive economic indicators in metal-intensive industries. Its national statistics bureau reports the country’s production of light vehicles rose by more than 8.5 percent—or nearly 50,000 vehicles—in the first two months of this year compared with 2023.

Luxembourg-based Ternium, which operates steel mills in Mexico, said in late February that steel demand has strengthened there, aided by nearshoring activity, manufacturing and investments in infrastructure.