Smaller numbers ahead

Economic data from the Eurozone continues to point to nonexistent or disappointing growth for many EU nations. A chart in the Wall Street Journal showing inflation-adjusted GDP (gross domestic product) growth from 2007 to the present indicates the United States has experienced the strongest economic recovery, followed by the United Kingdom and then Japan with modest growth. Lagging behind and not experiencing growth at all (after adjustments for inflation) are the Eurozone nations.

Throughout 2014, the global ferrous scrap market has responded with stable pricing to this mixed scenario, although pricing in the United States began showing signs of weakening in October.

In its survey of U.S. steel mill purchases of ferrous scrap, American Metal Market (AMM) magazine found that mill buyers paid $385.40 per ton for the prompt No. 1 busheling grade in their early October purchases, representing a drop of more than $15 per ton from the previous month.
 

Overseas mill buyers are also seeking bargains—and in some cases receiving them—when purchasing scrap from the U.S. AMM’s export price indices for the blended No. 1 and No. 2 heavy melting steel (HMS) grade have been weakening throughout 2013, but October drops proved steeper than most others.

The West (Pacific) Coast export index from AMM was more than $360 per ton in February 2014, but after a prolonged slide is down to $321 per ton as of mid-October. For much of the year, the West Coast price has held up slightly higher than the East Coast price, which has been negatively affected by a lack of demand from Turkey.

Pricing figures collected by the European Steel Association (EUROFER) through September had not yet revealed a price drop.

Through September, index figures for each of the three grades tracked by EUROFER (demolition scrap, new arisings and shredded scrap) have been holding steady since April 2014. September’s EUROFER index figures of 273 (demolition scrap), 266 (new arisings) and 268 (shredded scrap) were all higher by 4 or 5 points compared with August. (The association uses 2001 average pricing as 100 in its index.)

Economic and global trade data seems to be indicating that Turkey and China may be narrowing their ferrous scrap deficits, contributing to a slowing down of transboundary ferrous scrap shipments.

The ability of mills in Turkey and China to source greater volumes of affordable scrap domestically has likely acted to help soften scrap prices around the world.

This has been particularly evident in the North American market, as indicated by the AMM U.S. export pricing figures.

From the European perspective, writing in early October, Ruggero Alocci of Genoa, Italy-based Alocci Rappresentanze Industriali says “all the metallic raw materials prices are declining,” indicating that October index figures for Europe may head in the same direction as U.S. pricing did in October.

Alocci cites dropping iron ore spot prices as one such indicator and also says “ferrous scrap prices are declining [in] the fourth quarter, [which is] usually a depressed period for EAF (electric arc furnace) long production, particularly for billets and rebar.”

On the demand side, global steel output for 2015 is being forecast to rise, albeit modestly, by the World Steel Association (Worldsteel), Brussels, in a newly revised forecast released in early October.

Hans Jürgen Kerkhoff, chairman of Worldsteel’s Economics Committee, says, “The positive momentum in global steel demand seen in the second half of 2013 abated in 2014, with weaker than expected performance in the emerging and developing economies.”

The weakness caused Worldsteel to revise its 2014 steel consumption forecast downward. “The slowdown in China’s steel demand reflecting the structural transformation of [its] economy has contributed significantly to our lower global growth projection,” says Kerkhoff.

“We have also seen a major slowdown in South America and the [former Soviet Union] countries due to falling commodity prices, structural constraints and geopolitical tensions,” he adds. “In 2015 we expect steel demand growth in developed economies to moderate, while we project growth in the emerging and developing economies to pick up. In China rebalancing will continue to act as a drag on steel demand.”

The revised forecast predicts China’s steel consumption to grow by just 0.8% in 2015.