Prompt Grades Show Modest Decline in April

Ferrous scrap continues to trade within a relatively narrow price range in 2012, with the April buying period yielding slightly lower per-ton prices for most grades in most regions.

The prompt grades tracked by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, showed the most consistent decline, falling from $10 to $19 per ton on average in the United States from April 1 to April 20. (Click here to access the April Figures.)

The RMDAS prompt industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) fell by $19 per ton on the spot market as a national average, based largely on declines of that size in the North Midwest and North Central/East RMDAS regions.

The prompt grades price decline was less dramatic in the RMDAS South region (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia), where shippers on the spot market received just $10 less per ton in April.

Shredded scrap sold for an average of $8 less per ton in April, according to MSA, although again the price decline was less dramatic in the South, where the RMDAS No. 2 Shredded Scrap grade lost just $2 per ton in value.

The South also showed a trend difference when it came to the No. 1 heavy melting steel (HMS) grade, which fell from $5 to $11 per ton on average in the two northern regions. In the South, meanwhile, mills on the spot market paid $11 per ton more for No. 1 HMS in April compared to March.

A scrap recycler in the Western U.S. says he remains concerned about supply, noting that industrial and retail generation seems to have hit a plateau in his region. Without a noticeable rebound in the construction sector, he does not see scrap volumes increasing any in the spring.

The mild winter was among the topics addressed at the Spotlight on Ferrous session at the ISRI Annual Convention in Las Vegas in mid-April.

“The unusually mild winter will result in [improved] volumes in the first quarter for recyclers,” said Rich Brady, an executive vice president at OmniSource, Fort Wayne, Ind., when responding to a question about the winter of 2011-2012.

The downside, said Brady, is the disappearance of any “spring thaw” on scrap flows that recyclers may expect based on past Aprils and Mays. “We’ve actually seen some flows decreasing a bit in April,” said Brady, “which is not normal.”

On the demand side, panelist Pat McCormick of World Steel Exchange, Englewood Cliffs, N.J., says he anticipates overall modest growth in world steel production in 2012. “We expect global steel growth of 1.6 percent in 2012—about one-third of the 2011 growth rate,” he commented.

McCormick also noted that global ferrous scrap demand hit a bit of a rut with the Arab Spring uprisings of early and mid-2011 (affecting Turkish mills), but that buyers from mills in China tend to step in and buy additional scrap when prices drift down because of global events such as these.

He added that World Steel Exchange and its sister research company World Steel Dynamics see a “bounce back” in the first half of 2013 that could result in 5 percent steel production growth for the year and rising steel and ferrous scrap prices.

Panelist Spencer Johnson of International FC Stone, New York, remarked upon the correlation of LME (London Metal Exchange) steel billet pricing and ferrous scrap pricing, and noted that each price has spent the past several months rebounding from a decline caused by the collapse of MF Global in October of 2011.

In the United States in the week ending April 14, 2012, 1.975 million tons of raw steel was produced, creating a capability utilization rate of 79.9 percent, according to the American Iron & Steel Institute (AISI, www.steel.org). That figure marked an 8.9 percent increase from the 1.814 million tons produced a year earlier in the week ending April 14, 2011, when the capability utilization rate was just 74.2 percent.

Production for the week ending April 14, 2012 also was up 0.9 percent from the previous week (ending April 7, 2012), when the capability utilization was 79.2 percent.

Regarding the AISI production figures, panelists at the ISRI Ferrous Spotlight session commented that the figure is an average created by combining statistics from steel industry sub-sectors. “The capacity rate is quite a bit higher for sheet mills than for beams and long products,” said McCormick. Johnson added that mills that make tube and pipe products for the energy sector also are operating at higher rates than structural steel mills.

Only a rebound in construction will bring the capacity rate back fully, said McCormick, adding, “It will probably take two more years for the overall capacity figure to hit the pre-financial crisis level.”

Globally, figures from the WorldSteel Association (www.worldsteel.org) indicate the world’s steelmakers produced 132.2 million metric tons of steel in March 2012, a figure that is 1.8 percent greater than that of March 2011.

The March 2012 global steel production figure reached also is up dramatically from the prior month’s figure of 119.2 million metric tons—an increase of 9.9 percent compared to the previous month’s output.

Among nations making the biggest leaps in production from February to March were: China (55.9 million tons in February, 61.6 million tons in March); Turkey (2.76 million tons in February, 3.13 million tons in March); the United States (7.26 million tons in February, 7.76 million tons in March); and Russia (5.57 million tons in February, 6.4 million tons in March).

The Raw Material Data Aggregation Service (RMDAS) Ferrous Scrap Price Index is based on data gathered from a statistically significant compilation of verified ferrous scrap purchase transactions.

RMDAS is a service of Management Science Associates Inc. (MSA), Pittsburgh. Those seeking more information about RMDAS can contact MSA’s Jeralyn Brown at 724-265-6574 or via e-mail at JBrown@MSA.com.