Higher scrap prices and more pleasant weather seem to have combined to bring about a healthier flow of ferrous scrap—thus changing the balance and allowing mills and brokers to pay about $40 per ton less in May.
Pricing survey data for May spot buying from the Raw Material Data Aggregation Service (RMDAS), compiled by Management Science Associates’ (MSA), Pittsburgh, showed that mills paid from $35 to $51 less per ton for shredded scrap in May, compared to April. (click here to view the numbers for the month)
Most recyclers had predicted in April that a springtime supply boost would cause prices to ease back in May, and shredded scrap sold for about $350 per ton in most parts of the country during the May buying period. That was from $35 to $50 less than mills had been paying for shred in the April spot market.
The spot buying prices dropped off across all grades in all regions, according to the RMDAS figures, though shredded scrap in the North Central/East region took the sharpest drop, at $51 per ton.
Attendees of the 2010 Institute of Scrap Recycling Industries Inc. (ISRI) Convention were able to hear some views on where the steel and scrap industries are headed in the longer term.
“I think we’re already having some reduction in pricing, but I don’t see a long-term decline,” remarked industry analyst Michael Locker of Locker Associates, New York. “Scrap is a very valuable commodity.”
In a comment that drew a skeptical counterpoint from an audience member, Locker also predicted a looming shortage of ferrous scrap. “I think there’s going to be a shortage of scrap,” he commented. “The U.S. can’t continue to ‘mine’ as much scrap as it used to.”
The scrap will be in demand domestically, said Locker, from a steel industry that is at a relative advantage to China’s because of its access to feedstock. “China is now less competitive in steelmaking than the U.S.,” he remarked. “We can produce 90 million tons of iron ore in the United States and we only consume 63 million tons. Plus, we have access to scrap; we are in the driver’s seat in the world.”
Some of that scrap began emerging in the spring, according to Keith Grass, president of Nucor’s David J. Joseph Co. subsidiary. “Scrap flows were very, very low in the first quarter [of 2010],” he commented. “When we hit mid-March, we started seeing sufficient flows, particularly of obsolete scrap, which is our primary business.”
Tamara Lundgren, CEO of Schnitzer Steel Industries Inc., pointed to ferrous scrap’s role as a leading economic indicator. “We started seeing an improving flow of scrap about nine months ago,” she remarked. “We’re seeing steady improvement, which underpins the scrap industry as a leading indicator of economic growth. We saw it first.”
Larry Schnurbusch of steel producer SSAB remarked of his industry, “I think steel will stay strong on a global basis,” though he also commented, “I think it’s going to be a slow recovery” regarding the overall economy.
The renewed flow of scrap brought to mind the adage, “The best cure for high prices is high prices,” Schnurbusch said. As winter weather ended, “pent-up scrap began to flow, and that will always adjust prices downward,” he said.
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.