A recovery in fits and starts

Scrap recyclers would largely agree they have been dealing with better circumstances in June compared with April, but aspects of the market point to a manufacturing and household consumer recovery that does not have the feel of being V-shaped.

After a rebound in United States May ferrous scrap prices triggered largely by inadequate supply, recyclers were able to raise their scale prices and draw in a little more scrap. They were rewarded in June, however, with prices that were largely stagnant and concerns that prices in July will retreat further.

June Fastmarkets AMM ferrous scrap pricing displayed mixed signals. Prompt scrap, as measured by the No. 1 busheling U.S. Midwest Index price, rose for the second straight month, gaining nearly $14 per ton in value.

Recyclers on the U.S. Pacific coast also received higher bids in what was previously a moribund market. Export prices off that coast rose by nearly $40 per ton in late May and early June buying, according to Fastmarkets AMM.

Prices for obsolete grades in the Midwest and export bids on the U.S. Atlantic coast were more stable. Domestic mills were able to shop for shredded scrap and No. 1 heavy melting steel (HMS) at yards with adequate inventory. On the U.S. east coast, demand was muted by India’s two-month lockdown.

A recycler in the southeastern U.S. is reluctant to call demand robust, saying, “Manufacturing is slowly ramping up; scrap intakes have improved approximately five percent month-on-month.”

Several hundred miles north, a recycler in the Great Lakes region says, “We are seeing an improvement week after week. Things are becoming quite busy, but the stamping plants are still slow to resume.”

While scarcity of supply had been the main market driver in April and May, the recycler in the South cites weakness on the domestic demand side as playing a role in the stalled June prices and any potential July price slump,

He characterizes domestic steel mill demand as weaker than expected and creditd a stronger export market as having been helpful in finding a home for the newfound supply hitting shredder yards.

The recycler’s characterization of a weak steel industry pulse in the United States was backed up by the American Iron and Steel Institute (AISI) output figure for the week ending June 6.

The Washington-based AISI says the less than 1.2 million tons of steel made that week represents a 0.9 percent drop from the prior week. The decline follows small weekly gains exhibited in the final two weeks of May.

Compared with 2019, the landscape looks bleak. Output for the week ending June 6 was down by 36 percent compared with the same week in 2019, and year to date some 17 percent less steel has been made in 2020 compared with the first five months of 2019.

A Spotlight on Ferrous webinar held by the Washington-based Institute of Scrap Recycling Industries (ISRI) in mid-May reviewed market conditions at that time and offered thoughts on where the market could be headed.

Spotlight session moderator Brandi Harleaux, chief operations officer at Houston-based South Post Oak Recycling Center, remarked, “I think in some urban locations, you may see continued peddler traffic for those that have yards, even though things have slowed down. And for some, the flow didn’t slow down maybe as much as they anticipated it slowing down. For some, it’s been steady—but a slower steady.”

Blake Hurtik, an editor at Argus Media, commented, “Because of the lockdowns and lack of manufacturing activity, we’ve seen much-reduced supply of prime scrap.” This, said Hurtik, led to Argus’ price for No. 1 busheling to increase in May “on average by $36 per gross ton, month over month.”

Looking ahead to the summer, Hurtik said he expects the ferrous scrap market will still be supply-driven “with all eyes on the auto sector” and whether factories in that segment will generate scrap and consume finished steel.

On the demand side, Hurtik reported a sharp decline in exports to Turkey, the world’s number one ferrous scrap importer, while that nation dealt with COVID-19 and resulting restrictions. As the nation’s buyers re-enter the market, they were “not able to find ample amounts of supply from Europe and the U.S. and elsewhere, so that’s led them to raise prices to get the scrap they need,” said Hurtik.

An early June online Bureau of International Recycling (BIR) Ferrous Division meeting included an update from division board member Zain Nathani of the Mumbai-based Nathani Group. He provided an update on that nation, the second-largest importer of ferrous scrap by volume in 2019.

He said India is “finally starting to open up” after “a very hard lockdown since the middle of March.” Regarding the severity of that lockdown, the entire nation of 1.4 billion people had “zero auto sales” in April, said Nathani. “You can just imagine the impact on all the downstream sectors,” he added, mentioning makers of auto components and steel—and recyclers of ferrous scrap.

Concluded Nathani, “It has been very tough. The next few months, it’s going to be extremely challenging, especially if [COVID-19] cases go up.” The nation’s leaders will continue “trying to find the balance between opening up and keeping people healthy,” he remarked.