Ferrous markets diverge between prompt and obsolete
A boost in obsolete scrap supplies combined with lower overseas demand brought down the value of shredded and other obsolete grades in February.
Photo by Recycling Today staff.

Ferrous markets diverge between prompt and obsolete

Fastmarkets AMM surveys show prompt scrap holding its value in February, but weak export demand deflated shred pricing.

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February 16, 2021

February surveyed pricing calculated by Fastmarkets AMM displays downward price pressure on two of the three major ferrous scrap grades in the United States—shredded scrap and No. 1 heavy melting steel (HMS)—while prompt grades held onto the value they gained in the previous three months.

Overseas buyers of exported American ferrous scrap maintained a minimal presence in late January and early February, sending prices of HMS and shredded scrap on the U.S. East and West coasts falling during the time frame.

Trade press reports throughout late January and into February pointed to a lack of bulk cargoes heading to Turkey off the East Coast. Demand on the Pacific Coast also was reported to be sparse as mill buyers around the world pulled back from buying American scrap that had gained some $150 to $200 per ton in value in the previous 60 days.

As of mid-February, ferrous trader and consultant Nathan Fruchter of New York-based Idoru Trading says where the export market heads next remains uncertain. “I see demand in other regions, but it’s hard to tell with Asia being slow this week because of the Lunar New Year.”

Domestic steel output levels paint an encouraging picture. The Washington-based American Iron and Steel Institute (AISI) has reported that 1.74 million tons of steel were produced in the U.S. the week ending Feb. 13, with mills operating at a capability utilization (capacity) rate of 76.9 percent.

That weekly output figure is 5.5 percent smaller by volume compared with the comparable week of 2020, showing output is climbing steadily closer to pre-COVID-19 levels in the U.S. steel sector. At the COVID-19-related trough in late April and early May, U.S. mills were operating at just 51.1 percent of capacity.

Also providing encouragement, U.S. steel output the week ending Feb. 13 grew by 2.2 percent compared with total production the week before, ideally pointing to stable or growing finished steel demand.

On the scrap supply side, recyclers say higher scale prices yielded the expected result of increased volumes. “It has gotten stronger and definitely is picking up to what we expect and want,” says a processor of flows into his yards in the Western U.S.

“Things have been busy in the yard, especially with the current market,” comments a recycler in the Northeast, who adds, “I had locked in some decent pricing in January and was rushing to fulfill that order.”

The increase in obsolete scrap flows abetted by higher scale pricing created a disparity in Fastmarkets AMM monthly price index movements for prices released Feb. 10.

While Midwest Index shredded prices fell by about $70 per ton, and No. 1 HMS scrap dropped by about $55 per ton, prompt grades held onto their value in the Midwest.

The role of export markets in the obsolete versus prompt grades price disparity can be seen in the Fastmarkets AMM East and West Coast index prices for early February. Those export markets, which largely buy HMS scrap, fell by about $47 on the Pacific Coast and by $50 per ton on the East Coast.

Scrap processors will be keeping an eye on whether overseas buyers return to the market now that prices have fallen back to a level they find more palatable. In the meantime, overseas buyers may not find huge inventories of scrap to purchase even though they stayed away from the market for 30 days.

The same West Coast processor who described his scrap flows as stronger also says, “Flow has been good, but we’ve been hit pretty hard by inclement weather and that will slow things down for a bit. There is still room to improve as flows are still down from our averages before the pandemic.”

On the demand side, the processor says, “Demand seems to be strong for [late] February. Buyers are wanting material across all commodities.”

Parts of the U.S. Northeast and Midwest have experienced heavy snowfalls in February. The northeastern processor contacted by Recycling Today says severe weather has not affected his operations but adds that late winter tends to be a slow period regardless.

“We have not seen as much coming in, [and] this is often a slower time for us anyhow,” he comments. “We continue to receive scrap from our bigger customers, but local smaller foot traffic is much slower.”

In the third week of February, reports from Fastmarkets AMM and Davis Index indicate Turkish mill buyers are beginning to make more frequent bids and raise their prices for imported scrap.

“Turkish mills are expected to continue ferrous scrap purchases this week as they require cargoes for March and April shipment,” Davis Index reports Feb. 16. Davis Index says its own tracking shows prices for scrap shipped from the U.S. to Turkey rising as a result.