Trans-Atlantic contrasts

February scrap prices fell in both Europe and North America and had yet to show signs of bouncing back as of mid-April, but the ongoing strength of the U.S. dollar and a brutal winter made the price plunge more severe in the United States.

Steelmakers and scrap processors in the U.S. were met with a variety of bad circumstances in the winter of 2014-2015, including severe weather that curtailed construction activity and retail purchasing activity.

Steel production figures in February 2015 spell out the backwards momentum of the industrial economy in the U.S. The 6.26 million tons of steel produced in the U.S. that month was down nearly 8% from the February 2014 output figure and down a whopping 18.5% from output six months earlier in August 2014, according to Brussels-based Worldsteel.

For scrap processors in the U.S., the contraction of their regional buying market was met with an equally steady contraction in export demand for their ferrous scrap.

Among the culprits on this front were reduced steel production in some key markets (including Turkey and South Korea) and the shrinking value of the euro versus the dollar, which caused many Asian buyers to shop for scrap in the euro zone in early 2015 while making U.S. scrap a secondary priority.

The lack of demand for U.S. scrap figured heavily in the major price drop in that market in February, with pricing as measured by the RMDAS (Raw Material Data Aggregation Service) pricing service of MSA Inc. portraying the full extent of that month’s severe price drop.

In the 30 days between Jan. 20 and Feb. 20, the RMDAS prompt industrial composite grade lost $99 per ton (27%) in value, and shredded scrap fell by $85 per ton (24.5%).

Index pricing calculated by EUROFER (the Brussels-based European Steel Association), meanwhile, demonstrated price declines in January and February, but nowhere near the 24%-to-27% range seen in the U.S.

Between Dec. 2014 and Feb. 2015, the EUROFER demolition scrap price index fell just 4.6% in value, while both the shredded scrap and the new arisings price indices fell by 4.7%.

Genoa, Italy-based ferrous scrap trader Ruggero Alocci sounded a note of optimism in his April market report, referring to the last two weeks of March as consisting of “rising prices paid by the mills to increase their inventories before the Easter holidays.”

He continues, “The HMS (heavy melting steel) No. 1 and No. 2 scrap price is moving up and down in the range between $240 and $270 per ton CFR (cost and freight) to Turkey. Strong worldwide scrap consumption, lower scrap collection and DRI/HBI (direct reduced iron/hot briquetted iron) manufacturing costs are supporting these prices,” adds Alocci.

Ferrous scrap recyclers in the U.S., meanwhile, found far less to be optimistic about in March, holding out hope that perhaps warmer weather in April would jump-start regional demand for steel and ferrous scrap.

Looking back at the first quarter, Rich Brady of OmniSource Corp., one of America’s largest ferrous scrap recycling firms, comments, “Obsolete scrap flows were dramatically lower in the first quarter due to weather and the downward pressure on scrap pricing.”
 

One of the few bright spots for the market pointed out by some U.S. recyclers was renewed strength in containerized ferrous scrap buying, including buyers from India. However, a government agency in that nation may stop that momentum dead in its tracks.

An early April alert from the U.S.-based Institute of Scrap Recycling Industries Inc. (ISRI) to its members referred to a detailed new inspection regimen introduced by India’s Directorate General of Foreign Trade (DGFT) that took effect immediately.

The Mumbai-based Metal Recycling Association of India (MRAI) has negotiated a delay in the implementation of the regulation, which requires overseas scrap shippers to record videos of their container loading process. According to a second ISRI email to its members, the proposed regulation was delayed.

“The MRAI, who had just left an 11-hour meeting with the DGFT, [says] the DGFT has postponed the effective date for the new rules until May 1, 2015,” ISRI wrote to its members in an April 9 email.

“ISRI, along with others, sent letters to the highest levels of Indian government, including Prime Minister Modi, urging them to reconsider some of the requirements that were added to the new PSI (pre-shipment Inspection) rules,” says ISRI.

“It is our understanding the meeting was very productive and another meeting has been scheduled for April 30th, at which point it is hoped that most of the onerous requirements in the new rule will be eliminated.