Table set for sellers market?

As the calendar turned to 2024, several steel mill buyers in the United States entered the January scrap market seeking to peel back the $35 to $70 per ton of value ferrous grades had earned the previous month.

“We are expecting a soft ferrous market for January,” an auto dismantler told Recycling Today the first week of January.

At the end of the second full week of January, however, an active export market helped processors nearly hold the line on the asking price of shredded scrap and No. 1 heavy melting steel.

Export market leverage did not provide the same help for prompt grades, however, with Davis Index reporting in mid-January that some prime scrap grades were being purchased by domestic mills for $30 per ton less than what they fetched in December.

“Performance in our North America Steel Group was supported by sustained healthy construction activity.” – Peter Matt, president and CEO, CMC

The positive effects of steady orders from Turkey and Mexico demonstrated geographic limits in January. According to Davis Index, while East Coast and Gulf Coast export prices held steady, Pacific Coast shippers accepted bids down from $5 to $15 per ton in their less active market.

In many cases, the fact that domestic mills were unable to get the steep discounts they sought in January could set the table for a sellers’ market in early 2024—at least if steel production figures hold steady in the U.S. and in key export markets, including Turkey, Mexico and India.

Last November, scrap-fed melt shops at Turkey’s numerous electric arc furnace (EAF) mills showed an encouraging level of activity.

The 3 million metric tons of steel made in Turkey in November represented a 25.4 percent uptick in output compared with one year earlier, according to Turkish national steel association figures provided to the Brussels-based World Steel Association (Worldsteel).

India’s steel sector enjoyed steady growth last year, as it has for several consecutive years. The 11.7 million metric tons of steel produced in India last November is 11.4 percent higher in volume than its November 2022 production level.

Overall, India is likely to have made about 12 percent more steel in 2023 than it did in 2022. The active November in Turkey, meanwhile, helped it close its year-on-year output decline to about 6.1 percent—an improvement from the 16.3 percent decline Turkey had nearing mid-2023.

In Mexico, plans for two EAF capacity increases were announced last year, and even before that capacity comes online, Davis Index was characterizing the Mexican ferrous market as being driven by “unrelenting demand” in mid-January.

Data collected by the U.S. Census Bureau and published by the U.S. Geological Service (USGS) points to Mexico’s growing role in the U.S. scrap market.

In the first seven months of 2023, Mexican mills and foundries received 1.29 million metric tons of ferrous scrap from the U.S., valued at a combined $386 million, according to the USGS.

The level of shipments has Mexico ranked second as a buyer of exported U.S. ferrous scrap, behind only Turkey, and Mexico’s importance as a destination could grow when the announced steel industry investments come to fruition.

Also last November, steel producer DeAcero had contracted with Italy-based Danieli & C. S.p.A to equip a planned 1.5 million ton-per-year EAF melt shop at its Ramos Arizpe campus in northeast Mexico.

Along with its EAF equipment, DeAcero has ordered five metal shredding plants from Danieli Centro Recycling to be placed in different cities in Mexico.

Steelmakers in the U.S. largely managed profitable production last year, though not nearly at the record levels of 2022. Conditions were favorable enough for melt shops in the U.S. to produce as much steel in 2023 as they did the year before.

Figures from the Washington-based American Iron & Steel Institute show U.S. steelmakers producing 88.7 million tons of crude steel as of Dec. 30, 2023, up 0.2 percent from approximately 88.5 million tons one year earlier.

Even while acknowledging tighter profit margins throughout 2023, steel executives largely have portrayed a healthy demand landscape.

“Performance in our North America Steel Group was supported by sustained healthy construction activity,” says Peter Matt, president and CEO of Texas-based CMC, when reviewing the firm’s financial quarter that ended Nov. 30, 2023.

Although upward price momentum that struck in December did not sustain itself into January, scrap generators and processors could find ongoing global demand brings that momentum back again soon.