Ferrous Prices Regain What Was Lost in November

After a November buying period when ferrous prices dropped from $30 to $45 per ton, prices rebounded by nearly the same amounts in December.

Spot market figures collected through the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh, show domestic steel mills paying from $10 to $40 more per ton for their scrap in the first 20 days of December. (Click here to view monthly figures.)

The $400 to $495 per ton price paid by mills puts the market back into the range where it was from May to October of 2011.

The RMDAS Prompt Industrial composite grade (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) averaged $494 per ton nationally, moving closer to the $500-per-ton level it was at from May to October.

Prompt grades regained the most in value, gaining $41 per ton in value in the RMDAS North Midwest region, but just $31 per ton in the South region.

Per ton gains in the South region (consisting of Alabama, Arkansas, the Carolinas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas and western Virginia), were smaller overall compared to the rest of the country. The smaller upward price movement in the South had the effect of lining up pricing in all three regions to being close to identical.

Two different recyclers in the South report that across-the-scale scrap flows have been strong in December, and that some processors were able to take advantage of buying their peddler scrap for less in November and selling it to mills at the healthier December price.

However, a recycler representing a larger processing and wholesaling firm says as of mid- and late December many smaller dealers are holding onto their scrap.

“Our secondary suppliers feel bullish about January and are holding back,” says the scrap processor. “A lot of smaller dealers are seeing what they think will be a bigger market in January and holding on to material. Plus, a lot of them want to minimize their 2011 tax liability, so they are not selling any more in 2011.”

If that pattern is too widespread, however, mills may cut back on their January purchases and spot pricing may not rise as much as anticipated in early January, notes the recycler.

On the demand side, North American mills in early December operated at 74 percent of capacity, according to the American Iron and Steel Institute (AISI). That level is above the 2010 same-week rate of 68 percent, but down slightly from the previous week of 2011.

Globally, figures from the WorldSteel Association demonstrated a significant decline in steel production in November 2011 compared to the month before. While the world’s steel producers pumped out nearly 124 million metric tons of steel in October, in November that figure fell to just 115.5 million metric tons.

The biggest decline was in the biggest market, as Chinese production slipped by 4.7 million metric tons, accounting for about half of the global decrease. European steelmakers also produced about 1 million metric tons less, while steel output in the United States was down by less than 120,000 metric tons.

“The world crude steel capacity utilization rate of the 64 countries in November 2011 declined to 73.4 percent,” according the World Steel Association. “This is its lowest point for two years.”

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.