Although employment numbers have been positive in the U.S., steel output is drifting downward, and the ferrous scrap market remains a victim of the demand slump. But better scrap pricing news finally could be emerging in the East Coast export market.
As of mid-August, the scrap market was contending with domestic mill buyers who showed little willingness to bid up the price of scrap or, in some cases, even buy much scrap at all, even at lower early August price levels.
A signal that the bottom might have been reached, however, was coming from the East Coast. Exporters there, who had been filling steady orders for Indian buyers in June and July, finally were receiving competing bids from Turkey. This helped bump up prices by a few dollars per ton by mid-August.
On the domestic front, steel production figures from the Washington-based American Iron and Steel Institute (AISI) for the first week of August showed raw steel production in the U.S. of 1.723 million tons. That was down 0.2 percent from the prior week but marked a more noticeable 7.8 percent decrease compared with the same week a year ago.
“Export sales were weak in July; I would even venture to say close to nonexistent, with Turkish buyers practically abstaining from any buying.” – Nathan Fruchter, Idoru Recycling
In the week ending Aug. 6, mills in the U.S. operated at a capability utilization (capacity) rate of 78.2 percent. That is down from 78.4 percent the prior week and a healthier 84.7 percent one year ago.
According to AISI, year-to-date output was at 54.47 million tons through Aug. 6, down 3.1 percent from the 56.22 million tons through the same time last year.
Globally, Brussels-based World Steel Association has aggregated first-half 2022 steel output figures from 64 different nations. Nine of the 10 largest steelmaking nations produced less steel in the first half of this year compared with last year, with India being the lone exception.
In the first half of this year, those nations combined to produce 5.5 percent less steel than in the first half of 2021. By volume, China’s 6.5 percent decline comprises a sizable portion of that, and by national percentage, Iran’s decline of 10.8 percent and Russia’s of 7.2 percent exceeds that of China.
Turkey, a major buyer of U.S. ferrous scrap, made 4.6 percent less steel in the first half of this year compared with the first half of 2021. Combined with reduced domestic demand, that has helped drive down U.S. ferrous scrap prices into the summer.
Davis Index says early August domestic ferrous scrap trading “concluded with a downward trend of $70 per ton” on prime grades throughout the U.S. The scrap price tracking service says mill buyers in Ohio and other regions “reduced their buying drastically” during early August.
Davis Index has shredded and heavy melting steel (HMS) grades moving down from $20 to $30 per ton in the early August buying period, again citing limited buying programs by mills in many regions.
Shredded scrap and even prime grades are now selling for below $400 per ton in parts of the U.S., which would bring their pricing down to a level not seen since the depths of the COVID-19-related slowdown.
Reductions in August follow July drops, when Raw Material Data Aggregation Service (RMDAS) price tracking done by Management Science Associates showed prompt grades losing a whopping $150 per ton in value. The obsolete shredded and HMS grades, meanwhile, fell by about $35 to $40 on average nationally.
Ferrous scrap trader and consultant Nathan Fruchter of New York-based Idoru Recycling tells Recycling Today, “Recent U.S. East Coast export activity may be what is needed to help ferrous scrap pricing rise from its recent drop. Export sales were weak in July; I would even venture to say close to nonexistent, with Turkish buyers practically abstaining from any buying. As August began, these buyers realized they had stayed out of the buying arena for far too long, so they needed to buy.”
Fruchter adds, “Extreme heat [in Europe] is offering a disincentive for some scrap collection. With high truck fuel prices, it costs the collector much more to gather in his scrap and bring it to yards. For what? Just to bring it to a yard and see a low scale price?”
As drought conditions in Europe worsened, water levels on the Rhine River dropped to a point where shipping by barge was becoming more problematic.
That not only reduces waterborne freight capacity but also makes the freight per metric ton more expensive—effectively making European scrap less price competitive.
While Turkey’s president might be taking steps to set up a compatible payment system with Russia, Fruchter sees no sign that anything other than small volumes of scrap are heading into Turkey from Russia or Ukraine.