Recycled steel price waiting game continues

The prices domestic mills and overseas buyers are willing to pay for shredded recycled steel are poised to remain in a kind of purgatory heading into the summer.

As measured by figures collected by Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based MSA Inc., the value of shredded scrap has hovered in a narrow range from June of last year through May of this year with the exception of a three-month uptick this past winter.

Initial reports from Davis Index and other pricing services for the June buying period expressed little optimism toward an uptick occurring in that trading period.

The RMDAS No. 2 shredded scrap national mill buying average price from June 2023 through May 2024 hovered between $395 to $410 per ton in nine of those 12 months. In the one uptick, which lasted from December 2023 until February of this year, the price peaked at $469.

Scrap processors and shippers went through the first five domestic mill buying periods of 2024 without seeing their inventory gain value or their scale prices rise, and as of this week it seems possible that monthly streak would make it to six.

The processors and traders who would benefit from a change of status say the prolonged static price has had plenty of drawbacks, but the duration of it may be starting to dull some of those ill effects.

While a price downturn can cause some small dealers and generators of ferrous scrap, such as auto dismantlers, to hold onto material and keep it from the wider market, many are not able to wait out a six-month trough.

“I do not have any indication of anyone holding scrap [heading into] June,” a ferrous scrap buyer in the Great Lakes region tells Recycling Today. Speculating on price is not completely out of fashion, however, with the processor adding, “I myself will begin to hold scrap as the summer doldrums are upon us.”

Another buyer, whose company procures scrap in a wider portion of the Midwest, indicates suppressed scale prices may be a factor in inflows that he characterizes as “just OK.”

Scale flows and commercial routes in this buyer’s part of the country have not been overloaded with material this spring, according to the recycler.

“Daily average flows in May were similar to April across our regions, but the price drops since the first quarter have slowed things down considerably from February and March levels," he says.

The second processor, like his counterpart, does not consider there to be large volumes of material being withheld from the market, citing the need for business owners and managers throughout the scrap supply chain to maintain an income stream.

“Smaller dealers typically need cash flow, and we are not seeing inventories of scrap piling up anywhere in our regions,” he says. “There are some auto dismantler car body suppliers who are slowing up shipments due to lower pricing.”

One bright spot for shredder operators and some other buyers is the hot nonferrous metals market, with copper prices in particular prompting the peddler sector to have prioritized scrap collection and sales in the first half of 2024.

“With nonferrous pricing strong, it’s probably helping some of the ferrous flow continue that may otherwise be sat on due to lower prices,” the multilocation recycling manager says.

The other recycler, however, sees plenty of circumstances that have him feeling less than optimistic about the prospects for the ferrous scrap market as it heads into the second half of this year.

“I do not see any positivity in this market through the summer,” he says. “Mill demand for June will be tepid at best. With high interest rates, the [steel] service centers have moved to a just-in-time strategy, buying coils and not stocking the tons they used to.”

He cites two additional concerns: the lack of payoff in high-profile electric vehicle (EV) production plants and uncertainty tied to another contentious presidential election.

“The EV bubble is bursting and there is little to no optimism for the EV market, putting a good portion of stress on the manufacturing sector,” he says of perceptions in the Great Lakes region. “With the election looming, it appears that is also affecting business decisions as we wait to see where policies will take us."

Joining sentiment, domestic steel demand is another market factor that—like the price of ferrous scrap itself—is largely bumping along in a state of status quo in 2024.

Year to date after, steelmakers in the United States have produced 2.6 percent less steel compared with output in the period from January through May of 2023. That amounts to nearly 1 million tons less steel made in melt shops, according to the Washington-based American Iron and Steel Institute (AISI).

In the last week of May, about 1.74 million tons of steel was made in the U.S. That represented a 0.5 increase from what was produced the prior week but was down by 0.5 percent from the comparable week in 2023.

The nation’s mills operated at a capability utilization (capacity) rate of 78.5 percent in the last week of May, according to AISI, and averaged a 76.6 percent rate in the first five months of 2024.

Unfortunately for mill operators and scrap suppliers alike, that 76.6 percent figure is down 1.3 percent from the same time frame last year, when mills maintained a 77.9 percent capacity rate.