Shredding plant operators benefitted from an early November buying period that saw their shredded ferrous scrap rise in value by an average of $20 per ton, producing a second straight month of positive momentum for the grade.
November Midwest Index pricing from Fastmarkets AMM portrayed $20 per ton average bump ups for obsolete grades (shredded scrap and No. 1 heavy melting steel, or HMS) compared with a price rise of less than $10 per ton for its No. 1 busheling grade.
The relatively good news for ferrous scrap recyclers came amidst a November when news in the wider world was causing uncertainty for investors and political leaders alike.
Despite hotly contested elections in the United States and continued question marks about the global economy, a Great Lakes region recycler says of the ferrous market, “Nothing particularly worries me at the moment, fundamentally speaking.” Beyond the fundamentals of supply and demand, he adds, “Geopolitically, anything can happen and influence markets.”
At the same time the U.S. ferrous scrap market was exhibiting its trademark (in 2018) relative stability in November, volatility was widespread in some other commodities and in stock markets worldwide. Even steel and ferrous scrap pricing in other parts of the world was not necessarily following the U.S. track.
As of Nov. 12, the London Metal Exchange (LME) steel scrap contract was trading at $333 per metric ton, down more than 9 percent from its Jan. 1, 2018, price of $367 per metric ton.
Tracking done by Gianclaudio Torlizzi of Italy-based T-Commodity was showing downward pressure on the Shanghai Futures Exchange (SHFE) steel rebar contract. In the first 12 days of November, the SHFE rebar contract price fell by nearly 6.5 percent, dropping from $594.63 per metric ton to $556.38.
According to Frederik Husebye of Norway-based Norexeco, the Chinese rebar futures contract was the single most highly traded commodities contract in the world in 2017. (Husebye, whose company is preparing a scrap paper trading contract to be introduced in 2019, pointed this out at Recycling Today’s Paper & Plastics Recycling Conference Europe event in November.)
Whether Chinese investors’ early November sentiment toward rebar reflects concerns about that nation’s steel industry in particular or instead its overall economy, the fate of steel pricing and output in the country (which makes half of the world’s steel) affects the global market.
While China’s scale makes its steel and scrap pricing footprint important, the nation has become increasingly self-sufficient in ferrous scrap, unlike the industry in Turkey. That nation’s steel sector, however, also is facing uncertainty, according to a Fastmarkets AMM report in mid-November.
That report indicated bulk ferrous scrap buying for Turkish destinations had come to a standstill in the U.S., with those buyers concerned about dropping demand and falling prices for rebar in the region.
The domestic industry in the U.S., meanwhile, has taken advantage of import protection offered by the Trump administration, based on both earnings reports from steelmakers and data collected by the industry and government agencies.
Through the first 10 months of 2018, the Washington-based American Iron and Steel Industry (AISI) reported total and finished steel imports of 29.1 million tons and 22.1 million tons respectively, down by 11.4 percent and 13.3 percent from the same period in 2017.
However, finished steel imports into the U.S. grew by more than 9 percent in October compared with the prior month, and weekly domestic output data from the AISI was showing signs that domestic steelmakers may have maximized their ability to benefit from the U.S. tariffs.
In the week ending Nov. 10, 2018, domestic raw steel production dropped slightly compared with the week before, and the mill capacity rate also dipped from 81.8 percent to 81.7 percent, according to AISI data.
As Trump administration tariffs have been introduced and held steady throughout the year, the domestic industry’s capacity utilization rate has risen from 70.7 percent in the first week of January to the 81.8 percent peak (thus far in 2018) reached in the first week of November.
A look back at steel tariffs enacted in March 2002 by the George W. Bush administration demonstrates a record interpreted by some economists and analysts as one of short-term success followed by negative impacts to the wider economy, as well as a thumb’s down vote from the World Trade Organization (WTO).
The 2002 8-to-30-percent tariffs excluded steel from Canada and Mexico and were preceded by an industry slump that had led to several steel company bankruptcies in the prior years.
Similar to the 2018 tariffs, those in 2002 ran into opposition from steel users and buyers in the United States and from governments of other nations that contended the tariffs violated WTO rules.
In December of 2003, the Bush White House announced the end of the tariffs, stating that the “safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them.”
A 2003 study, funded largely by steel users going by the name the CITAC (Consuming Industries Trade Action Coalition) Foundation, said of the 2002 tariffs, “Higher steel costs hit American manufacturers of products using steel quickly after the tariffs were imposed, and with force,” and “steel tariffs caused shortages of imported product and put U.S. manufacturers of steel-containing products at a disadvantage relative to their foreign competitors.”