Ferrous Prices Maintain Status Quo in May

Equilibrium settled in for another 30 days in the ferrous scrap market, as pricing on the domestic spot market held steady in the United States in the May buying period.

According to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, U.S.-based steel mills paid nearly identical prices for the major ferrous scrap grades across all regions of the country.

No average price moved by more than $5 per ton in any of the three RMDAS regions, and the national averages for the three most commonly traded grades moved by $1 per ton or remained flat.

Adding to the overall challenging environment for ferrous scrap has been the soft export market. According Mike Marley's Marley's Heavy Melt, offshore demand for ferrous scrap has been limited off the East Coast, forcing more scrap metal recyclers to look to domestic markets.

In the South region, the single biggest price swing was a $5 drop in value for the RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles).

In the North Midwest region, a $3-per-ton decline in No. 1 heavy melting steel dropped the average price to $399, creating the only average in any region less than $400 per ton.

The output and order books for most steel mills have remained in balance, with sheet mills and pipe and tube mills running at high capacity numbers, while mills that produce construction products continue to lag behind in output.

Volatility on the demand side, for the most part, is coming from the export market, where reduced orders can affect regional shipping patterns and pricing. The pattern thus far in 2012 has been for reduced demand in an export region one week, only to be met with increased demand elsewhere the next week.

On the supply side, recyclers in many regions characterize generation as mixed. In the South, a ferrous scrap dealer says auto hulk scrap rates have been consistent throughout the year, as has industrial generation.

Construction and demolition activity remains lackluster, with only spot projects occasionally generating plate and structural and other construction-related grades.

The pattern has been similar throughout 2012, he says. “Most of my roll-off containers are out at plants and shops—I really don’t have many spotted at construction sites at all,” he comments.

National figures reflect these generation patterns, as the construction sector remains the U.S. economy’s weak spot, while vehicle sales are steady, and the moving trend for industrial output is positive.

The Federal Reserve Bank reported in mid-May that industrial production advanced significantly in April. The Wall Street Journal reported that factory, mine and utility output advanced 1.1 percent in April, “the strongest gain since December 2010.”

Economists contacted by the Wall Street Journal said the increase was above their expectations and could be pointing to GDP (gross domestic product) growth in the United States that should be healthier in the final three quarters of 2012 compared with the first quarter.

Signals from economies in the rest of the world, including steel production figures, are not as positive. The Brussels-based World Steel Association (WorldSteel) has reported that global steel output declined by 4 million metric tons in April compared with the prior month.

Chinese steelmakers produced 60.6 million metric tons in April, 1 million metric tons of steel less than the month before.

April steel production in Turkey, the largest U.S. export market for scrap steel, also declined as steelmakers there produced 2.9 million metric tons of steel, down from 3.1 million metric tons in March.

Concerns about the economy of the European Union also are reflected in steel output in the EU’s largest nations. Germany’s 3.6 million metric tons of steel produced in April was down from 3.9 million metric tons made in March.

Output in Spain has remained static at 1.3 million metric tons in March and April, but the April 2012 figure is down by more than 14 percent from the amount of steel produced in Spain in April 2011.

The Raw Material Data Aggregation Service (RMDAS) Ferrous Scrap Price Index is based on data gathered from a statistically significant compilation of verified ferrous scrap purchase transactions.

RMDAS is a service of Management Science Associates Inc. (MSA), Pittsburgh. Those seeking more information about RMDAS can contact MSA’s Jeralyn Brown at 724-265-6574 or via e-mail at JBrown@MSA.com.