Ferrous market shows tenuous upward momentum

Although steel mills in the United States and most other parts of the world are running at a lower output than one year ago, the effects of diminished scrap supply are finally having an impact on ferrous scrap pricing.

Pricing from the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based MSA Inc. and business information service Davis Index showed ferrous scrap gaining value in December 2022. As of mid-January, Davis Index daily pricing was pointing to further price increases for the material.

In its late November to Dec. 19, 2022, tracking period, RMDAS showed buyers in the United States paying an average of $27 per ton more for shredded material compared with the prior month. The circumstance provided a second month of relief for shredder operators who had watched the value of their shred fall throughout most of 2022.

The other major grades with pricing issued by RMDAS—No. 1 busheling and No. 1 heavy melting steel (HMS)—also gained value in December. The prompt busheling grade rose in value by $31 per ton while mills paid $19 more per ton for No. 1 HMS.

In the first two weeks of January, surveying by Davis Index shows sellers of ferrous scrap continue to have pricing momentum on their side, based both on U.S. domestic purchases and export pricing.

In the second week of January, New York exporters are fetching nearly $386 per ton for their No.1 and No. 2 bulk HMS scrap, according to Davis Index. That represents a further $26 per ton price rise compared to the December 2022 average for the material.

In the domestic market, mills and foundries are paying about $406 per ton for shredded scrap in the second week of January. If prices for shred hold at above $400 for a January monthly average, it will mark a return to a level not seen since September of last year.

Reduced output from steelmakers seem to indicate the price rebound is attributable to meager supply rather than any resurgence in domestic or global finished steel demand.

“Flows are still poor to fair,” says a scrap recycler in the heart of the Great Lakes automotive manufacturing region. “We started to see a significant slowing in October only to see it further slow in November and slide even further in December.”

The recycler says smaller dealers in his market region “are not seeing flows improve across the peddler scale with the January [scale price] boost.” He is even less optimistic about prospects for manufacturing scrap flows, pointing in part to an analysis showing a potential U.S. passenger vehicle production decline of some 900,000 units in 2023.

Slowing mill output and tepid auto sales combined cause him to speculate, “I personally feel January is a restocking month and mills are fighting over the scrap that is available.”

A cause of concern on the demand side remains domestic steel output that continues to show weakening momentum, according to figures released by the Washington-based American Iron and Steel Institute (AISI).

The final weekly statistical summary released by AISI shows steelmakers in the U.S. produced slightly more than 89 million metric tons of steel in 2022, with mills operating at an average capability utilization (capacity) rate of 77.7 percent.

Those year-end figures show a production volume that is down 5.8 percent from the 94.5 million tons of steel made in the U.S. in 2021. In 2021, the U.S. mill capacity rate averaged 81.2 percent.

Processors with access to export markets, who have likewise enjoyed price increases as 2022 turns to 2023, might have some of the same fears that price hikes are driven by lack of demand rather than buoyant prospects for steel demand.

Figures gathered from 64 steel-producing nations by the Brussels-based World Steel Association (Worldsteel) for the first 11 months of 2022 showed that in that timeframe 3.7 percent less steel was made globally compared with the first 11 months of 2021. Scrap buyer Turkey, with output down by 12.3 percent, is foremost among the nations with a reduced appetite.