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Numerous Concerns

Market Reports - Ferrous

Ferrous scrap recyclers are keeping a close eye on the global economy, generation and pricing.

RTGE Staff May 8, 2013

Ferrous scrap recyclers in Europe and North America are pointing to several sources of concern both with the overall economy and industry-specific issues.

In the United States, as March turned to April, ferrous scrap recyclers hoping for renewed scrap generation or better pricing expressed disappointment with activity in early April.

“Scrap flows have been tight up until now—worse than in previous years,” says a scrap processor in the eastern U.S. “With prices falling in April, I don’t expect flows to improve much even with the spring season.”

A ferrous scrap buyer in the Southeast paints a similar picture. “Scrap is extremely tight,” he comments. “Spring is not bringing forth additional scrap as we had hoped,” he says as of mid-April. “Obsolete scrap is in very short supply.”

Making matters more difficult, he says, is an increasing number of shredding plants in his operating region. “Factoring in the new shredding capacity that has come online since the fall of 2008, our average daily buy is off over 50% compared to five years ago.”

The increased shredder population not only bites into flows but into profitability as well, he contends. “Add to that the margin squeeze we are in because of that new competition and we are finding it very difficult to turn a profit.”

The topic of shredder capacity was raised at the Ferrous Spotlight session at the 2013 Institute of Scrap Recycling Industries Inc. (ISRI) Convention & Exposition, held in Orlando April 11.

Spotlight speaker Phillip Hoffman said the number of shredders at scrap yards was increasing in North America, causing competition to heat up among yards and squeezing margins. As a result, he said the spoke-and-hub approach to shredder operations may be giving way to smaller, portable shredders. Hoffman is vice president of U.S. ferrous scrap trading for Medtrade, the U.S. subsidiary of Turkish steel producer Colakoglu Metaluji.

His fellow panelist Sachin Shivaram commented, however, that while the market is reaching saturation, scrap recyclers are right to put in shredder capacity to take advantage of the optimal freight conditions offered by ferrous shred. Shivaram is general manager of metallics purchasing for steelmaker Severstal NA.

According to Italian ferrous scrap broker Ruggero Alocci of Alocci Rappresentanze Industriali, Genoa, recyclers in Europe are hungry for scrap of any variety, as arisings continue to be disappointing.

“It seems a gentle breeze is blowing away the main economic concerns in several geographic areas,” writes Alocci in his monthly report. “The developing countries are still growing and the U.S. economy is [recovering], with the currency costs still very low. Unfortunately, this breeze does not blow for some European countries.”

He continues, “The first half of 2013 sees a difficult time for the European steelmakers and the metallic raw materials suppliers, due to the lower demand, the depressed prices and—above all—the ever-shrinking profit.”

Although Alocci hints at economic recovery in the U.S., recyclers there are not as convinced. A ferrous scrap buyer with accounts spread throughout the southeastern and southwestern U.S. reports mixed results.

“As far as the spring, the best description is mixed,” he comments. “There are some [generators] who are steady but not significantly ahead of average. There are other manufacturers who are at slightly below average production and not expecting much improvement in the months ahead.”

The regions he serves with an active energy sector provide one bright spot. “Oil and gas customers are among the exceptions, as they are quite busy.”
 


Farther north in the U.S., North of the Mason-Dixon line, a ferrous scrap buyer in Ohio chimes in with a similar report, but also a little bit of optimism as the Midwest tries to leave winter behind. “Scrap flow has been very slow—very,” he reports in mid-April. “We see with the weather getting better that flows are picking up, so I’m very encouraged.”

Early April pricing, unfortunately for processors, reflected a demand scenario that was as lackluster as the supply picture. American Metal Market (AMM) reports in April that export buying off the East Coast was “at a standstill” as “Turkish mill buyers failed to return to the docks” even after ferrous prices fell by some $20 per ton.

At the ISRI Ferrous Spotlight session, one panelist told attendees that waiting out the market beyond the first two weeks of any month may often prove beneficial.

Severstal NA’s Shivaram said the company’s ferrous scrap purchases are guided by steel pricing, with Severstal preferring to purchase material consistently throughout the month rather than at the beginning or end of the month. “The impression now is if I buy scrap mid-month, I am desperate for scrap,” he said. “That is not the case.” He told attendees, “If you are not selling scrap in the middle of the month, you are missing out on a dynamic market.” Shivaram said there is value in having more chances to transact purchases throughout the month.

In terms of global scrap demand thus far in 2013, steel output was up slightly in the first two months of 2013 compared with the one year ago, but this is largely because China’s steel mills continue to churn out steel.

According to figures compiled by the Brussels-based World Steel Association, while China produced 12 million more metric tons of steel in the first two months of 2013 compared to the same period in 2012, production in the rest of the world decreased.

The World Steel Association’s figures and an accompanying monthly report issued in late March confirmed that some Turkish mills are slowing down. “Turkey’s crude steel production for February 2013 was 2.7 million metric tons, a decrease of 3.9 percent compared to February 2012,” the association reported.

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