The potential for a very good year

Departments - Commodities Ferrous

U.S. ferrous scrap processors and traders expect positive momentum to start the fourth quarter of the year.

October 26, 2021

Domestic and global demand for ferrous scrap generated in the United States helped the average early October selling price for obsolete grades bounce back from a mild September slump. The positive momentum to start the fourth quarter raises the prospects that ferrous scrap processors and traders will look back fondly on the calendar year.

Although the value of prime ferrous scrap dropped for the second consecutive month in October, according to Fastmarkets AMM surveys, the rebound in obsolete grades provides good news for shredder operators and other processors.

Adding to optimism were reports in the metals trade press in the second week of October that mills from Turkey had swooped back into the bulk cargo market. The $440 to $450 prices assigned to these transactions point to a rebound in the East Coast export market after a slow late-summer period.

West Coast prices held relatively firm in September and October. “Demand overseas is strong for us, so we’re having a good summer and year,” a West Coast processor and exporter tells Recycling Today.

“Demand overseas is strong for us, so we’re having a good summer and year.” — a West Coast scrap processor

On the supply side, the same processor says material flow has been good.

That echoes sentiment in most other parts of the country. Scale pricing has been on an upward trend throughout 2021 providing steady over-the-scale traffic this year.

The market for prime grades has been trending $100 to as much as $150 per ton higher compared with obsolete grades throughout the year. The October drop in prime grades was one of the first cases all year when obsolete grades showed positive momentum, while prime grade pricing dropped.

An acquisition in the second week of October will be watched closely by generators and buyers of prime ferrous scrap. When Cleveland-Cliffs announced its acquisition of Detroit-based Ferrous Processing & Trading (FPT), its CEO pointed to FPT’s prime grades market share.

“FPT has a very meaningful presence in prime scrap, [and] with all the new flat-rolled EAF [electric arc furnace] capacity coming online in our market over the next four years, prime scrap will only become more and more scarce,” Lourenco Goncalves, chair, CEO and president of Cleveland-Cliffs, says.

Cleveland-Cliffs has more basic oxygen furnace (BOF) capacity compared with EAF capacity. Those furnaces are less reliant on scrap as a feedstock. How the BOF steelmaker offers its scrap to the market will be closely watched by the scrap and steel sectors in the U.S. In the initial announcement, Goncalves portrays a closed loop process in which prime scrap collected by FPT would then be directed to mills operated by Cleveland-Cliffs.

Goncalves adds, “The acquisition of FPT will enhance our ability to buy back prime scrap directly from our clients, cutting the middlemen and improving the margin contribution from scrap for both Cleveland-Cliffs and for the manufacturing and service center clients that will be able to sell scrap directly back to us.”

Mill operators and scrap processors continue to enjoy a 2021 economy that features steady demand for finished steel and equally strong demand for scrap and other iron-based metallic units used in furnaces.

Portland, Oregon-based Schnitzer Steel Industries Inc. says it expects net income in the range of $43 million to $45 million in its fiscal 2021 fourth quarter, which ended Aug. 31, 2021. That figure is below the more than $60 million in net income earned in the previous quarter, but the company says favorable market conditions continue to generate profits.

Favorable domestic market conditions are being matched by economic growth in nations that accept U.S. scrap imports. The Turkish steel sector seems to have overcome earlier jitters tied to that nation’s fiscal policies and currency weakness.

The Indian subcontinent (as represented by India and its neighbors Bangladesh and Pakistan) is buying U.S. ferrous scrap at the same pace it did last year, helping demand meet or exceed supply in coastal regions of the U.S.

Statistics gathered by the U.S. Census Bureau and aggregated by the U.S. Geological Survey show ferrous scrap trade between the U.S. and the Indian subcontinent remains vigorous. The volume of ferrous scrap exported from the U.S. to India, Bangladesh and Pakistan (combined) has been nearly identical in the first half of 2021 compared with the first six months of 2020. Approximately 1.265 million metric tons were shipped in both time frames.

Bangladesh is the biggest buyer in the ferrous sector, having purchased 622,000 metric tons, or 49 percent, of the total. India was next, at 332,000 metric tons (26 percent), followed by Pakistan, which received 311,000 metric tons (24.5 percent).