Ferrous market enjoys March upward bump

Disappointing flows into scrap yards continued through February, creating sufficient tightness in the market that mill buyers in the United States had to increase their bids heading into March.

The early February earthquakes in Turkey largely did not cause mills in that nation to withdraw from the global market. In the aftermath of the quakes, Turkish President Recep Erdoğan promised a rapid and expansive rebuilding program that, if enacted, likely will lift the capacity rate of Turkey’s electric arc furnace (EAF) mills.

On the supply front, late-winter storms in several regions of the U.S. added another supply pinch to the equation. A recycler in Minnesota tells Recycling Today the storms further lowered what was already dismal February volumes.

The muted supply seems to have been behind an upward trend in scrap prices from mid-February and into the March domestic mill buying period. By March 10, mills in the U.S. were paying $468 per ton on average for shredded scrap, according to Davis Index.

The $468 figure is a 4.9 percent increase from the $446 mills were paying in February and 11.7 percent more than the $419 figure in January.

While scrap processors are happy to receive a few more dollars per ton for their shipments, the mood will be more positive if the higher scale prices can translate to better flows.

In terms of busheling and other prompt grades, the auto industry reports modest sales growth in early 2023 compared with January and February of last year.

“With U.S. light vehicle sales volume for the month projected at 1.1 million units, we expect February 2023 to represent year-over-year growth of 5 percent, the seventh consecutive month of year-over-year volume improvement,” S&P Global Mobility writes in a late February analysis. “The tally would also be up more than 6 percent compared to January volumes."

The industry analysts say February U.S. auto sales are projected at an estimated 14.4 million light vehicles, using a seasonally adjusted annual rate calculation.

It is unclear whether construction and demolition activity will retain its recent forward momentum throughout the year. The Arlington, Virginia-based Associated General Contractors of America (AGC) says that while large infrastructure spending numbers have been published, few contractors have be awarded contracts.

The reshoring of manufacturing, however, could be more than notional. The AGC says while spending varied among nonresidential construction sectors, manufacturing plants—the biggest component—increased 5.9 percent.

In presentations to investors, U.S. EAF steelmakers have been referring to infrastructure spending and reshoring as reasons for optimism.

Charlotte, North Carolina-based steelmaker Nucor Corp., in a January 2023 presentation to investors, pointed to recently adopted federal policies as future steel demand drivers.

The scrap-fed EAF steelmaker says the Infrastructure Investment & Jobs Act adds $550 billion infrastructure spending over the next decade and forecasts that the spending measure is expected to increase steel demand by 3 million tons to 5 million tons per year.

Regarding reshoring—typically defined as manufacturing operations returning to the U.S. from overseas—Nucor points to the CHIPS and Science Act as providing about $55 billion in incentives to reshore essential manufacturing.

The steelmaker says the CHIPS Act is prompting an expected 27 projects by 2029, including 10 semiconductor plants with an average cost of about $11 billion, and adds that these manufacturing facilities are highly steel intensive.

Nucor has invested more than $2.1 billion in steel sheet and bar production that came online between 2019 and 2022, and those investments yielded about $620 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in 2022 alone.

Competing EAF producer Steel Dynamics Inc. (SDI), Fort Wayne, Indiana, also expressed optimism about America’s appetite for steel in the near and medium terms.

“Customer order entry activity continues to be healthy across our businesses,” SDI President and CEO Mark D. Millett said as part of SDI's January presentation. “Steel pricing has firmed, and our order activity and backlogs remain solid. We believe North American steel consumption will increase in 2023, and that demand for lower-carbon emission, U.S.-produced steel products coupled with lower imports will support steel pricing.”

Like Nucor, SDI is investing in new capacity and says it expects its newest mill in Sinton, Texas, to be operating at around 80 percent of capacity going forward in 2023.