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January 16, 2012

If ferrous scrap recyclers were concerned about price declines in November, they merely needed to wait for the December buying period, when prices rebounded by nearly the same amounts they had fallen by 30 days earlier.

Spot market figures collected through the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, show domestic steel mills paying from $10 to $40 more per ton for their scrap in the first 20 days of December.

The $400-to-$495-per-ton prices mills paid put the market back into the range it occupied from May to October of 2011.

The RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) averaged $494 per ton nationally, moving closer to the $500-per-ton level it was at from May to October.

Prompt grades regained the most in value, gaining $41 per ton in the RMDAS North Midwest region, but just $31 per ton in the South region.

Per-ton gains in the South region (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia), were smaller overall compared with the rest of the country. The smaller upward price movement in the South had the effect of lining up pricing in all three regions nearly identically.

Two different recyclers in the South report that across-the-scale scrap flows have been strong in December and that some processors were able to take advantage of buying their peddler scrap for less in November and selling it to mills at the healthier December price.

A peddler yard operator in Arkansas says that in mid- December, despite the harsh weather moving through his state at the time, traffic is brisk. In some cases, peddlers, farmers and other property owners are selling obsolete items to earn some last-minute holiday spending money.

However, another recycler who works for a larger processing and wholesaling firm, says that as of mid- and late December many smaller dealers are holding onto their scrap.

"Our secondary suppliers feel bullish about January and are holding back," says the scrap processor. "A lot of smaller dealers are seeing what they think will be a bigger market in January and holding on to material. Plus, a lot of them want to minimize their 2011 tax liability, so they are not selling any more in 2011."

If that pattern is too widespread, however, mills may cut back on their January purchases and spot pricing may not rise as much as anticipated in early January, the recycler says.

On the demand side, North American mills in early December produced at 74 percent of capacity, according to the American Iron and Steel Institute (AISI, www.steel.org). That level is above the 2010 same-week rate of 68 percent but down slightly from the previous week of this year.

With 2011 nearly complete, steelmakers in the United States have produced nearly 90 million tons of steel, showing a 7.5 percent increase from the 83.6 million tons that had been produced in the first 11-and-a-half months of 2010, according to AISI figures.

Globally, figures from the World Steel Association (www.worldsteel.org) demonstrated a significant decline in steel production in November 2011 compared with the month before. While the world's steel producers pumped out nearly 124 million metric tons of steel in October, in November that figure fell to just 115.5 million metric tons.

The biggest production decline was in the biggest market, as Chinese production slipped by 4.7 million metric tons, accounting for about half of the global decrease. European steelmakers also produced about 1 million metric tons less, while steel output in the United States was down by less than 120,000 metric tons.

"The world crude steel capacity utilization rate of the 64 countries in November 2011 declined to 73.4 percent," according the World Steel Association. "This is its lowest point for two years."

Despite the slow November, with 11 months of figures compiled, steel production in China in 2011 has totaled 631 million metric tons, a nearly 10 percent increase over production in 2010.

In major scrap export destination Turkey, steel production in the first 11 months of 2011 was an impressive 17.6 percent higher year-to-date compared with 2010. Some 3.6 million metric tons more steel was produced in the 2011 time frame compared with the year before.


December 2011 Spot Pricing

 

Total U.S.   

North Central/ East North Midwest  South  
Prompt Industrial Composite $494 $495 $491 $486
#1 HMS $404 $408 $401 $401
#2 Shredded Scrap $442 $443 $435 $447
#2 Shredded/Change vs. Month Before +$27 +$26 +$30 +$29

After several months of stability, prices received by shippers dropped from $30 to $45 per ton in the November buying period.

Reported regional aggregated spot market prices per gross ton shown for each commodity are based on all Management Science Associates (MSA), Pittsburgh, Raw Material Data Aggregation Service (RMDAS) participants’ actual order data submitted to and processed by MSA as of the 20th of each respective “buy month,” rounded to the whole integer. A map of RMDAS regions is available at http://rmdas.msa.com, as is a further explanation of RMDAS methodology and an accompanying disclaimer.

No. 2 shredded scrap is defined as containing 0.17 percent or greater copper content. The prompt industrial composite consists of an average of No. 1 bundles, No. 1 busheling and No. 1 factory bundles. Additional pricing information on each grade can be found at www.RecyclingToday.com.

© 2011 Management Science Associates Inc. All rights reserved RMDAS is a trademark of Management Science Associates Inc.


 

(Additional information on ferrous scrap, including breaking news and consuming industry reports, can be found at www.RecyclingToday.com.)