A recovery in fits and starts

Ferrous scrap prices remained stagnant in June and are expected to retreat in July.

Scrap recyclers would largely agree they were dealing with better circumstances in June compared with April, but aspects of the market point to a manufacturing and household consumer recovery that does not have the feel of being V-shaped.

After ferrous scrap prices rebounded in May, triggered largely by inadequate supply, recyclers raised their scale prices to draw in a little more scrap. They were rewarded in June, however, with prices that were largely stagnant and concerns that prices will retreat further in July.

June Fastmarkets AMM ferrous scrap pricing displayed mixed signals. Prompt scrap, as measured by the No. 1 busheling Midwest Scrap Index price, rose for the second straight month, gaining nearly $14 per ton in value.

“Manufacturing is slowly ramping up; scrap intakes have improved approximately 5 percent month on month.” – a scrap recycler in the Southeast

Recyclers on the Pacific Coast also received higher bids in what was previously a moribund market. Export prices off the West Coast rose by nearly $40 per ton in late May and early June, according to Fastmarkets AMM.

Prices for obsolete grades in the Midwest and export bids on the East Coast were more stable. Domestic mills were able to shop for shredded scrap and No. 1 heavy melting steel at yards with adequate inventory. On the East Coast, demand was muted by India’s two-month lockdown.

A recycler in the Southeast is reluctant to call demand robust. He says, “Manufacturing is slowly ramping up; scrap intakes have improved approximately 5 percent month on month.”

A recycler in the Great Lakes region says, “We are seeing an improvement week after week. Things are becoming quite busy, but the stamping plants are still slow to resume.”

While scarcity of supply had been the main market driver in April and May, the recycler in the Southeast cites weakness on the domestic demand side as playing a role in the stalled June prices and any potential July price slump.

He characterizes domestic steel mill demand as weaker than expected and credits a stronger export market as being helpful in finding a home for the newfound supply that is hitting shredder yards.

The recycler’s characterization of a weak steel industry pulse in the United States was backed up by the American Iron and Steel Institute (AISI) output figure for the week ending June 6.

The Washington-based AISI says the less than 1.2 million tons of steel made that week represents a 0.9 percent drop from the prior week. The decline follows small weekly gains exhibited in the final two weeks of May.

Compared with 2019, the landscape looks bleak. Output for the week ending June 6 was down by 36 percent compared with the same week in 2019. Year to date, about 17 percent less steel has been made in 2020 compared with the first five months of 2019.

A Spotlight on Ferrous webinar hosted by the Institute of Scrap Recycling Industries, Washington, in mid-May reviewed market conditions at that time and offered thoughts on where the market could be headed.

Spotlight session moderator Brandi Harleaux, chief operations officer at Houston- based South Post Oak Recycling Center, said, “I think in some urban locations, you may see continued peddler traffic for those that have yards, even though things have slowed down. And for some, the flow didn’t slow down maybe as much as they anticipated it slowing down. For some, it’s been steady—but a slower steady.”

Blake Hurtik, an editor at Argus Media, said, “Because of the lockdowns and lack of manufacturing activity, we’ve seen much-reduced supply of prime scrap.” He said this led to Argus’ price for No. 1 busheling increasing in May “on average by $36 per gross ton, month over month.”

Looking ahead to the summer, Hurtik said he expects the ferrous scrap market will still be supply-driven “with all eyes on the auto sector” and whether factories in that segment will generate scrap and consume finished steel.

An early June online Bureau of International Recycling Ferrous Division meeting included commentary from division board member Zain Nathani of the Mumbai-based Nathani Group. He provided an update on India, which was the second-largest importer of ferrous scrap by volume in 2019.

He said India is “finally starting to open up” after “a very hard lockdown since the middle of March.”

Regarding the severity of that lockdown, the entire nation of 1.4 billion people had “zero auto sales” in April, Nathani said. “You can just imagine the impact on all the downstream sectors,” he added, mentioning manufacturers of auto components and steel as well as recyclers of ferrous scrap.

“It has been very tough,” he concluded. “The next few months, it’s going to be extremely challenging, especially if [COVID-19] cases go up.”

July 2020
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