Management Science Associates Inc., Pittsburgh, is producing a set of monthly ferrous scrap pricing index figures that will be distributed by Recycling Today and www.RecyclingToday.com.
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The Raw Material Data Aggregation Service (RMDASTM) Ferrous Scrap Price Index is based on data gathered from a statistically significant compilation of verified ferrous scrap purchase transactions.
As part of its index, consisting of a limited number of well-traded scrap grades within each geographic region, MSA is also introducing a more reflective, comprehensive price for new industrial production scrap purchased by steelmakers.
MSA is calling the grade its “Prompt Industrial Composite.” The Prompt Industrial Composite price reported is the aggregated weighted average price of RMDAS’ #1 Busheling and #1 Bundles grades combined.
As of this month, the scrap buying transactions of 16 steel mill companies operating 54 melting locations are recorded and compiled monthly through the RMDAS system. According to MSA, this accounts for more than 55 percent of the ferrous scrap consumption in the United States.
MSA and the Recycling Today Media Group have reached an agreement that allows Recycling Today to publish the index numbers each month and distribute them shortly after they are compiled on the 20th of each month via its Web site and to its e-newsletter subscribers.
“Offering the RMDAS Ferrous Scrap Price Index will provide a tremendous service to our readers, many of whom are looking for pricing guidance as they trade ferrous scrap materials,” says James R. Keefe, group publisher of the Recycling Today Media Group, a division of GIE Media Inc., Cleveland.
As detailed in a feature story that appeared in the March 2006 issue of Recycling Today, the RMDAS product, as it has been developed and marketed to date, was created to serve the steel industry as well as to provide a representative and accurate ferrous scrap price index. So should scrap processors be suspicious of there being a pro-scrap buyer bias in the numbers?
The MSA leadership team says that scrap companies that have looked at the RMDAS methodology have a difficult time finding fault with it such as a “pro-buyer bias.” The only information reported by RMDAS is based on actual order transactions of its participants – “and the aggregated prices reported are reflective of the market for a particular grade at a moment in time,” says Ralph L. Pinkert, MSA Business Development Director.
In fact, MSA has instituted a pilot program to evaluate the feasibility of integrating scrap sellers into the RMDAS program as full participants. Several major scrap companies have committed to participating in this effort. This would not only provide increased “coverage” of the market for RMDAS, but another opportunity for MSA to verify the accuracy of some of the data provided to it by participating steel firms.
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“People want more reliable and accurate information, because it makes markets more efficient,” says Pinkert. “Price transparency brings more stability and rationality to the market, yet reflects genuine volatility caused by supply and demand changes. Reporting based on aggregated volume and price data will provide both scrap buyers and sellers a reasonable barometer of what has occurred.” (To view a larger version of Shredded Scrap Click on the following link -- Shredded Scrap)
Adds Pinkert, “Historically, scrap companies have been able to make money off obsolete scrap by adjusting scale prices and turning the spigot on and off. But it is in serving industrial accounts, which continuously generate new production scrap that is usually bought on a pricing formula basis pegged off of an index, where an inaccurate 30-day price can be costly. If that price is not representative of the true market price that month, scrap companies can lose money.”
He adds, “Another potential value of RMDAS to scrap sellers is that many of RMDAS’ current steel mill participants have indicated that they may now consider entering into longer-term, formula-based purchasing agreements with responsibly performing scrap suppliers. These steel companies would consider using the reliable RMDAS Ferrous Scrap Price Index, to be published each month in Recycling Today.”
According to Pinkert, the transaction information that is collected from each of the corporate participants in RMDAS is aggregated, with access to the resulting reports being provided to the RMDAS participants through an MSA Web-based analytical reporting tool.
Says Pinkert, subscribers to the RMDAS service will receive benefits including:
- Access to reliable aggregated market data, while maintaining confidentiality of each participant company’s proprietary data
- Accurate, timely average price and volume information by region
- More easily identifiable attractive potential springboard buying/sales opportunities
- The ability to measure one’s performance and to benchmark — for example, companies and/or individual locations can specify comparative regions and/or steel product groups. RMDAS’ benchmarking capability of accurate price information can be particularly important to publicly-held companies.
Those seeking more information about RMDAS can contact Ralph Pinkert at 773-588-1199 or via e-mail at RPinkert@MSA.com.
To view the complete set of monthly Ferrous Scrap Index figures released by MSA, including those on a regional basis, click on the following link -- Index Figures