Ferrous scrap demand has not plummeted and supply has not completely dried up, but one steel analyst’s recent description of a “rutted road” for the steel and scrap industries does not provide much encouragement for a swift improvement.

Speaking at the 2013 Bureau of International Recycling (BIR) World Recycling Convention in Shanghai in late May, steel industry analyst Peter Marcus of World Steel Dynamics, Englewood Cliffs, N.J., said the steel industry will continue to travel the “rutted road” it started out on in 2008 through the rest of this year and into 2014.

Marcus was bearish about ferrous scrap and iron ore pricing during that stretch, declaring “Steel’s iron age is over.” He predicted, though, that raw material costs are on their way to swinging back in favor of ferrous scrap as a feedstock, with the pendulum moving in scrap’s favor by 2015.

China’s ferrous scrap reservoir has been building, said Marcus. He forecasts that by 2025 China will have a 145-million-tons-per-year ferrous scrap surplus, “given the same EAF (electric arc furnace) steelmaking and BOF (basic oxygen furnace) scrap usage figures.”

Even if China adds EAF capacity and charges more scrap into its BOF mills, Marcus foresees “75 million tons of surplus” scrap in China annually by 2025. (For more on the state of the steel industry, see “Empty Pages” starting on page 66 of this issue.)

In the short-term, prices stabilized for most grades of ferrous scrap in early June, as many mill buyers in the United States agreed to pay per-ton prices similar or identical to what they had paid 30 days earlier.

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/Default.aspx.

The American Metal Market (AMM) June Midwest Ferrous Scrap Index for No. 1 Busheling, released June 10, rose by 6 cents per ton from the month before. Shredded scrap in the Midwest, however, dropped by some $6.40 in the early June buying period, according to AMM.

Market reports offered at the BIR Ferrous Division meeting offered a mixture of resignation, concern and a few hints of optimism regarding the global market.

Division Chair Christian Rubach of Germany’s TSR Recycling remarked that “economists are starting the discussion [of] whether we are at the end of the commodity super cycle [that] fueled our steel recycling industry for the last [several] years.”

A report submitted by United Kingdom-based Tom Bird of Van Dalen Recycling noted that “prices have continued to weaken during the month [of May] and we could see further reductions for June across the board.”

Bird added, “Like 2012, 2013 is proving to be a difficult year. After a fairly positive start to the year, the market has gradually tightened though April and May.”

Bird did refer to a positive scenario, saying, “If steel demand does recover in the second half of the year, then this will filter into the scrap market with a revival of sorts from mid-June onwards. We should also see a lift after Ramadan [which ends Aug. 7 in 2013].”

Summarizing the U.S. market, Blake Kelley of Sims Metal Management, New York, described declining prices in May and referred to “trade opinion” predicting declines of $10 per ton or more in June.

Prices for finished hot-rolled coil steel in the U.S., at from $606 to $639 per metric ton, are “the lowest since 2010, as steelmakers struggle to maintain order books where lead times are reportedly three to four weeks.”

Kelley noted that the world’s steel industry in 2013 continues to produce more steel than ever before and is on pace to produce 1.56 billion metric tons of steel this year—54 million more metric tons than in 2012.

However, with much of the growth occurring in China, where iron ore-fed basic oxygen furnaces predominate, the world in 2013 will “apparently consume 11 million metric tons less purchased scrap,” according to Kelley.

In the U.S., according to the American Iron and Steel Institute (AISI), Washington, D.C., in the week ending June 1, 2013, domestic raw steel production was 1.84 million tons at a capability utilization (capacity) rate of 77 percent. That was down some 100,000 tons from the week ending June 1, 2012, when production was 1.95 million tons at a capacity rate of 78.6 percent.

Year-to-date production of 40.4 million tons (at a capacity rate of 76.6 percent) represents a 7 percent decrease from the 43.4 million tons made during the same period in 2012, when the capacity rate was 79.6 percent, according to AISI.

However in May 2013, the Worldsteel Association reported that crude steel production in the 63 reporting countries was up 2.6 percent for the month compared with May 2012 to 136 million metric tons.

*FOB New York, in metric tons; **FOB Los Angeles, in metric tons. The American Metal Market (AMM) Midwest Ferrous Scrap Index and 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 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 detailed methodologies are available at www.amm.com/pricing/methodology.html. The grades are based on the Institute of Scrap Recycling Inc. (ISRI) specifications from 2012.

Moving into the summer months, signs of upward momentum in nonferrous scrap markets are nonexistent. The sense is growing that markets for copper, aluminum and other nonferrous metals will continue to remain flat. Several sources say more buyers are competing for available scrap, making business more challenging.

The extended price slump, which began in early 2013, runs counter to more traditional markets, when price and demand have perked up during the first quarter of the year.

One source in the eastern half of the country says that while markets in the first quarter of the year were not robust, much of last year was positive for nonferrous metals, and the slower markets are part of a downward adjustment.

Another source, who splits his nonferrous orders between offshore and domestic markets, agrees that aluminum and copper prices have been on a steady slide since this January, despite a fairly stable domestic manufacturing sector.

Another nonferrous scrap dealer who specializes in copper describes a mediocre market. “There are sporadic orders, and the supply is there, although we have to work a bit harder to get the material,” he says.

*Average monthly settlement price, cash buyer; U.S. dollars per metric ton. Source: London Metal Exchange, www.lme.com

According to conventional wisdom, the supply of marketable scrap has declined. However, several other scrap dealers say that rather than a decline in available material the tightness in supply is a result of increased competition for available material, which also is leading to narrower margins for processors.

One East Coast scrap metal dealer says large, publicly traded companies are aggressively paying more to secure material, which is putting additional pressure on independent scrap metal recycling firms.

Several sources say operations are good overall, with the aerospace and transportation sectors growing at a decent clip. Meanwhile, the housing sector, a key economic indicator, has been showing signs of life.

Copper, which seems to be driven by general pessimism, may have found a floor, at least temporarily. However, even that potential positive sign is said to result from problematic mine operations that have cut into supply. A recent mine collapse in Indonesia, for example, has curtailed operations temporarily, creating a ripple effect in secondary markets.

While the United States seems to be showing modest signs of improvement, challenges continue for those shipping to Europe and China. European economies continue to struggle, and China’s economy, which had been growing at double-digit rates, has cooled.

The copper and aluminum market in China also are under significant pressure, as their sharp ramp up in production is running up against slowing domestic demand. The result has been significant cuts in production.

The aluminum overcapacity problem isn’t limited to China, however. Rusal, the largest aluminum producer in the world, also has announced plans to shutter around 4 percent of its manufacturing capacity. Other large and mid-sized aluminum producers also are taking steps to reduce their aluminum production to better align with demand.

According to preliminary reports from various paper stock dealers, recovered fiber markets should not experience a significant slide in pricing through the summer. Depending on the fiber grade, markets are either holding their own or showing modest price movements. Old corrugated containers (OCC) could show some modest improvements in price and demand, while mixed paper and old newspaper (ONP) may dip, albeit slightly, through the next few months.

OCC continues to surprise paper stock dealers, as prices have increased nearly $10 per ton in some regions of the country. On the West Coast, one larger exporter says that despite the rhetoric about shipments to China becoming close to impossible in light of Operation Green Fence, movement of material into the country remains decent. “Things are pretty stable,” he says.

OCC supply continues to be a bit constrained, which is helping keep prices somewhat stronger than expected, with domestic board mills also looking to purchase more of the material to meet their needs.

The domestic market also is being helped by SP Fibertech’s (formerly SP Newsprint’s) paper mill in Dublin, Ga., which has switched part of its production from newsprint to packaging grades. As a result, the mill has boosted its intake of OCC.

Price for baled, full truckloads of OCC Grade 11 on the open market reported June 10, 2013; source: Forest2Market’s Market2Mill, www.forest2market.com

 A large material recovery facility (MRF) operator in the eastern United States says the SP mill presently is buying roughly 1,000 tons of OCC per day, which has helped keep OCC markets in the Southeast fairly stable.

Helping to boost OCC demand in the eastern part of the country is Atlantic Packaging’s reopening of its Whitby, Ontario, mill earlier this year. The mill originally produced recycled newsprint. However, because of difficult newsprint markets, the mill had closed. Atlantic Packaging has reopened the mill and now is producing SmartCorr, a 100-percent-recycled lightweight paper for linerboard and corrugated medium. The mill’s short-term goal is to produce 300,000 tons of recycled linerboard and medium per year.

Another mill generating significant interest among paper stock dealers is the Greenpac recycled board mill slated to open in Niagara Falls, N.Y., in July. The mill is majority owned by the Canadian paper company Norampac, with a minority stake owned by two corrugated converters, Jamestown Containers and Containerboard Partners, as well as by the Quebec fund manager Caisse de dépôt et placement du Québec. One source says the mill has been building up OCC inventory throughout the past few months in anticipation of its startup.

The mill will manufacture a lightweight linerboard, made with 100-percent-recycled fiber, on a single machine with an annual production capacity of 540,000 tons, according to Cascades, Norampac’s parent company.

While OCC has held up fairly well, two other bulk grades—mixed paper and ONP—have seen a mild dip, though this decline was of a smaller degree than what dealers had earlier expected.

A West Coast exporter says that while shipments of mixed paper and ONP to China have been curtailed, several other Asian countries, including Korea, Malaysia and India, have increased their purchases of mixed paper, which is keeping prices from falling too sharply.

ONP also has seen a further softening in price. One source says several newsprint mills in China are taking extended downtime, which will cut into overall demand for ONP.

The ONP market also continues to suffer from limited demand from domestic buyers.

While Operation Green Fence has created anxiety since it was enacted several months ago, a number of sources say they have already seen an improvement in recovered fiber quality as MRFs respond to the new situation in China.

Domestic mills, which also have complained about the degradation of material quality, also are becoming more assertive in rejecting inferior grade shipments of recovered fiber, sources say.

Suppliers to these mills say they are concerned about a decline of another type: recovered fiber generation. The summer months typically are a low-generation time of the year, however, generation from the printing industry, which typically supplies a significant volume of higher-grade paper stock to dealers, is declining as more printers close down their operations.

Trex Co. Inc., Winchester, Va., has announced it is growing its “mini-baler” pilot program in Southern California.

Trex, which manufactures composite decking and lumber products using recycled plastic bags and films, has been placing balers at the sites of smaller businesses to increase its access to scrap materials. The company also has announced it is introducing new compressed air balers to accommodate greater quantities of materials.

In a company news release, Trex says the program has drawn such diverse participants as dry cleaners, independent grocery stores, hospitals, a horse stable, Petco Park (home of the San Diego Padres) and the City of Solana Beach.

Plastics are collected and taken to mini-balers at transfer stations or other locations, where they are compressed into 50-pound bales and then transported to Trex’s manufacturing plants. Trex plans to grow the program throughout Southern California, with the eventual goal of making mini-balers available to municipalities in every state.