Timing is everything

Prices domestic mills paid for ferrous scrap rebounded with the new year, but conversely, overseas buyers came in with lower bids during the same time frame.

January pricing calculated by American Metal Market (AMM) and MSA Inc.’s RMDAS (Raw Materials Data Aggregation Service) showed gains of around $20 per ton for each of the major ferrous scrap grades purchased for the domestic market.

While shippers finally were able to garner some additional income per ton on their domestic deliveries, an already weak export market dried up even further in January in terms of demand, and what bids there were declined in value rather than rising.

A scrap processor in the eastern United States says the January market reflected diminished supply on the one hand (helping to finally raise prices domestically) and a profound lack of interest from overseas buyers.

“Flows are no better than previous months, and with cold weather finally hitting our area, it is even slower,” he says of the supply situation in the East.

Regarding the export situation on the Atlantic Coast, he comments, “We participated in one bulk cargo shipment in early December, but since then the market has backed off. The Indian container market also leveled off and was not competitive with our domestic options in January, so we sold no export tonnage during the month.”

“The Indian container market leveled off and was not competitive with our domestic options in January, so we sold no export tonnage during the month.” – a scrap recycler in the eastern U.S.

While the domestic market featured rising prices in the first month of the year, navigating that market when steel mill capacity rates are below 70 percent is a tricky business dependent on strong relationships and careful timing, the recycler says.

His company has remained on the short list of suppliers at several U.S. steel mills, he adds, because his firm “has been a loyal and consistent seller; even when we do take some export orders, we are always able to place our volume, and we can ship by truck, rail or barge.”

But even as a steadfast supplier, the recycler in the eastern U.S. says the current market leaves no margin for error in terms of pulling the trigger on a sale. “There are months that, if we hesitate just a day or two, we could be shut out. We have to keep a dialog going throughout the month, especially the last week, when buying plans are being formulated.”

While the first few weeks of 2016 did little to dispel existing concerns in the ferrous scrap sector in terms of supply, conditions on the domestic demand side may be showing signs of improvement.

As lower scale prices continued to restrict supply into the new year, a late January snowstorm in the Mid-Atlantic region was belatedly introducing the kind of winter weather that causes additional, temporary supply disruptions.

On the demand side, the ongoing strength of the U.S. dollar is contributing to the continued lack of interest in American scrap from overseas buyers who can shop in several other regions with weaker currencies.

As for domestic demand, however, statistics gathered from the Washington-based American Iron and Steel Institute (AISI) point to a rising mill capacity rate in the U.S.

In the week ending Jan. 16, 2016, domestic mills produced 1.65 million tons of steel at a capacity rate of 69.1 percent. Both figures are higher than those from the previous week (though down from comparable 2015 figures).

Production for the week rose by 3.6 percent compared with the week ending Jan. 9, 2016, and the 69.1 percent capacity rate thus climbed from the previous week’s 66.7 percent rate.

The Jan. 16, 2016, weekly figures, however, are down sharply from the same week in 2015, when production stood at 1.8 million tons, and mills were operating at a 76.4 percent capacity rate.

The output and capacity rate dropped steadily throughout 2015, which the AISI consistently blamed on a tide of low-cost imported finished and semifinished steel from nations, including South Korea, China and Turkey.

Data on imported steel gathered by the U.S. Commerce Department and commented upon by AISI show that both 2014 and 2015 featured hefty amounts of imported steel heading into the U.S.

Citing what it calls its Steel Import Monitoring and Analysis (SIMA) data, AISI says for the full year of 2015, “total and finished steel imports were 38.8 million net tons and 31.4 million net tons, respectively, down 12 percent and 7 percent from 2014.” The estimated finished steel import market share in December 2015 was 28 percent, AISI says, while it was 29 percent for all of 2015.

Nations sending the most finished steel into U.S. ports in 2015 were South Korea (4.86 million tons, down 11 percent from 2014), Turkey (2.79 million tons, up 27 percent from the year before) and China (2.33 million tons, down 27 percent compared with 2014).

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.

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.