Ferrous scrap recyclers continue to experience 2013 as a series of signs of hope that flare momentarily and then seem to fade with the next setback or disappointment.
Many scrap recyclers reported an uptick in volumes in July and August. Seasonal factors combined with economic indicators pointed to two reasons why lackluster sectors, such as construction and demolition, might have had a little more activity.
While the increased volume was appreciated, it occurred at roughly the same time as a drying up of ferrous scrap export orders followed by concerns that the economic recovery remains slow and is subject to hitting the brakes when bad news is in the air.
A scrap recycler in the Southeast notes the absence of export orders as well as messages he is receiving from domestic steel mill buyers that their companies have seen the peak demand for finished steel in 2013. “In terms of volume, mill buyers had a level program in September,” the recycler says, “but there is some concern that order books for the fourth quarter won’t be as good as they were for the second and third quarters.”
Export orders have been so few and far between that American Metal Market (AMM) did not update its East and West Coast export pricing indices between Aug. 26 and Sept. 12, 2013. Normally the indices are updated weekly.
Domestic demand helped prevent ferrous scrap prices from falling too far on AMM’s monthly indices, with No. 1 busheling down by nearly $10 per ton, or 2.4 percent. Shredded scrap and No. 1 HMS (heavy melting steel) prices both fell by more than 3 percent, however, with shred prices falling nearly $12 per ton.
Prices tracked by the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based Management Science Associates (MSA) have shown a similar pattern, with its national average for No. 2 shredded scrap having fallen to $375 per ton in August.
That figure is down from its 2013 peak of $411 per ton in March. The price has bounced back and forth in that range throughout the past 12 months, with the market neither able to gain momentum nor willing to plunge into a trough.
Domestic steel production has likewise bumped along in a narrow range of output and capacity utilization throughout 2013. According to the American Iron and Steel Institute (AISI), Washington, D.C., in the week ending Sept. 7, 2013, raw steel production in the U.S. was 1.87 million net tons at a capacity utilization rate of 78.1 percent.
That figure is up slightly (0.9 percent) from the 1.85 million tons produced the week before and is up 6.9 percent from the 1.75 million tons produced in the week ending Sept. 7, 2012.
But for each encouraging week of production gains tracked by AISI this year, there has tended to be an opposite and roughly equal week of output loss. Overall figures indicate 2013 will not be a growth year for steel producers in the U.S.
“Adjusted year-to-date production through Sept. 7, 2013, was 66,581,000 net tons, at a capability utilization rate of 77.2 percent,” says AISI. “That is a 4 percent decrease from the 69,390,000 net tons during the same period [in 2012].”
Figures gathered by the World Steel Association (WorldSteel), Brussels, indicate that the U.S. situation is typical of the rest of the world, though Chinese steelmakers continue to increase output.
July 2013 statistics gathered by WorldSteel indicate that the European Union (EU) is joining the U.S. in moving backward in steel production, with the 27 EU nations producing 5.3 percent less steel in the first seven months of 2013 compared with the same period in 2012.
Joining the rest in the mild steel slump is Turkey, the largest single destination for ferrous scrap exported from the U.S. In the first seven months of 2013, Turkish steelmakers have produced 20.2 million tons of steel, down 4 percent from the 21.1 million tons they produced in the first seven months of 2012.
The trend in Turkey is not encouraging based on July figures. The 2.8 million tons produced by Turkish steel mills was down 10 percent compared with the 3.1 million tons of output in July 2012.
The drop does not seem directly tied to the construction sector in the Gulf Cooperation Council (GCC) region, where construction spending has continued unabated in 2013. An estimated $1.5 billion in construction is taking place in Saudi Arabia and the United Arab Emirates (UAE) alone, according to a report in Arab News, based in Riyadh, Saudi Arabia.
Dubai-based building products company Danube estimates that government-led construction projects alone in the GCC will spur an estimated $900 billion in spending between now and 2020, according to a report on the ConstructionWeekOnline.com website, also based in Dubai.
Several thousand miles away, scrap recyclers in the U.S. hope those projects make it off the drawing board and soon result in increased activity at Turkish steel mills.
The American Metal Market (AMM) Midwest Ferrous Scrap Index is 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 methodology is available at www.amm.com/pricing/methodology.html. 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 detailed methodology is available at www.amm.com/pricing/methodology.html.