After ferrous scrap processors received a healthy price boost in August, many had anticipated further strengthening in the market during the September buying period.
Unfortunately for them, according to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based Management Science Associates (MSA), ferrous scrap shippers received anywhere from $4 to $34 less per ton on the spot market in early September.
There were considerable regional disparities in price movements in September, with prices in the RMDAS South region (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia) actually rising $1 per ton for shredded scrap and losing just $4 per ton for No. 1 heavy melting steel (HMS).
In all regions, including the South, the RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) lost value in September compared with August, with a $19 average national price drop.
Pricing in the North Midwest region (consisting of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin, the Dakotas and the northwest corner of Indiana) experienced some quirky behavior in September, with shredded scrap falling $34 per ton. While shredded scrap there fetched the highest price of the three regions in August, it plummeted to the lowest per-ton price in September.
Nationally, per-ton prices for shredded scrap were higher than for prompt grades, creating an anomaly that was the subject of discussion at the Institute of Scrap Recycling Industries Inc. (ISRI) Commodities Roundtable Forum in Chicago in September.
When asked about the narrow price difference between prime grades of ferrous scrap and the shredded and HMS grades that had been experienced in the summer of 2012, panelists at the Ferrous Roundtable pointed to melt-shop preferences.
Even though prime grades may have been tempting at the price, EAF (electric arc furnace) melt-shop managers “tend to not like change,” said Fred Hauptstueck of Steel Dynamics Inc., Fort Wayne, Ind., so they have continued to buy shred despite the narrower spread.
John Keyes, a district trading vice president with Tube City IMS, Glassport, Pa., agreed with that assessment, noting that buyers from integrated mills with more flexibility in their feedstock “were the winners” during that timeframe, when “big, heavy square things were on sale.”
Roundtable moderator Frank Goulding of Newell Recycling of Atlanta LLC, East Point, Ga., asked panelists about the reintroduction of price volatility in the ferrous scrap market in the summer of 2012.
Michelle Applebaum of MARI, Highland Park, Ill., said the answer was tied to the lower operating rates of steel mills in the United States.
As mills adjust their production levels, said Applebaum, “I would estimate that for the next five to seven years, until mills start operating at a higher capacity,” ferrous scrap price volatility will be part of the picture, she commented.
To combat the volatility, many steel producers are turning to direct reduced iron (DRI) and other scrap supplements, and the timing may be right to do so, said Applebaum. Previously, the high cost of natural gas presented a barrier to the widespread use of this feedstock. However, the abundance of natural gas being produced in the eastern United States has lowered that cost significantly.
Mills that are concerned about a shortage of ferrous scrap may not need to worry too much, said Keyes. “I’m amazed at the number of places scrap will come from over the years,” he commented, pointing to the demolition of steel mills, automotive plants and rail cars.
More recently, Keyes said he had seen scrap coming from the demolition of paper mills throughout North America and sugar mills in the Southern U.S. and the Caribbean region.
“It’s a resilient market; when the scrap price makes it affordable, demolition follows,” he remarked.
On the demand side, Keyes said the recent slowdown in Chinese economic growth has had a ripple effect on ferrous scrap demand in Turkey. “Chinese billets are being sold there for a cheaper price,” he said, “so [Turkish mills] are shutting down their electric arc furnaces (EAFs) while keeping their rolling mills going.”
The ISRI Commodities Roundtable Forum was Sept. 11-12 at the Hyatt Regency Chicago.
September 2012 Spot Pricing
|North Central/ East||North Midwest||South|
|Prompt Industrial Composite||$394||$393||$388||$404|
|#2 Shredded Scrap||$398||$401||$376||$406|
|#2 Shredded/Change vs. Month Before||-$10||-$7||-$34||+$1|
Mill buyers doing spot purchasing were able to get scrap for an average of $10 to $12 less per ton in September compared with August.
Reported regional aggregated spot market prices per gross ton shown for each commodity are based on all Management Science Associates (MSA), Pittsburgh, Raw Material Data Aggregation Service (RMDAS) participants’ actual order data submitted to and processed by MSA as of the 20th of each respective “buy month,” rounded to the whole integer. A map of RMDAS regions is available at http://rmdas.msa.com, as is a further explanation of RMDAS methodology and an accompanying disclaimer.
No. 2 shredded scrap is defined as containing 0.17 percent or greater copper content. The prompt industrial composite consists of an average of No. 1 bundles, No. 1 busheling and No. 1 factory bundles. Additional pricing information on each grade can be found at www.RecyclingToday.com.
© 2012 Management Science Associates Inc. All rights reserved RMDAS is a trademark of Management Science Associates Inc.
(Additional information on ferrous scrap, including breaking news and consuming industry reports, can be found at www.RecyclingToday.com.)