-Ferrous Scrap Gains Value in December- 27 Dec 10

RMDAS pricing for December buying period shows shredded and prompt scrap values rising up to $50 per ton.

Scrap recyclers were able to garner additional dollars for their ferrous shipments in the December 2010 buying period, according to pricing survey data from the Raw Material Data Aggregation Service (RMDAS) that is compiled by Management Science Associates Inc. (MSA), Pittsburgh. (December Prices)

RMDAS figures for the first 20 days of December show No. 2 shredded scrap (shred with more than .17 copper content) selling for an average of more than $400 per ton for the first time since August of 2008, although the average did hit $399 per ton in April 2010. Domestic mills buying on the spot market paid $42 per ton more for No. 2 shredded scrap in December compared to the November average.

Prices paid for prompt grades (new production scrap consisting of #1 busheling, #1 bundles and #1 factory bundles) also surged, gaining nearly $40 per ton on average, moving to $432 per ton for the December buying period.

The biggest price swing in any given region was the additional $53 per ton that mills paid for prompt grades in two different regions—the South and the North Midwest (consisting of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin and the northwest corner of Indiana). In those two regions, mills buying on the spot market paid an average of $53 more per ton in December for prompt grades.

As was the case throughout much of 2010, recyclers saw higher prices driven at least as much by supply scarcity as by any unanticipated demand from mills or export brokers.

“The export buyers are in and out—they wait for the pricing they like,” says a scrap recycler in the Southwest of orders for containerized ferrous scrap. “Domestically, there has been a slight uptick in mill operating rates, but I think the pricing dynamics are supply-driven,” he adds.

On the supply side, a recycler in the Western United States says his levels of scrap flow have made progress throughout 2010, but still have not reached the peaks they achieved in mid-2008. “We’re still not going to hit the kind of monthly numbers we had back then, but we’re getting a little closer,” he says.

The supply outlook for 2011 remains unclear, although most economic forecasters are not predicting either booming factory output numbers or a wildly improved construction sector.

The more encouraging signs are coming from the manufacturing sector. As of late November 2010, U.S. manufacturing shipments remain 14 percent below their pre-recession peak, “but the gap is closing fast, bolstered by strong demand from emerging markets,” according to a research report from CIBC World Markets in Toronto.

An article in Canada’s Financial Post quotes Steven Ricchiuto, chief economist for Mizuho Securities USA in New York, as saying “This was a weird recession. Everyone blames the bank crisis [for the sputtering economic recovery] but then, when the auto recovery got turned on, it’s, ‘Gee, what a surprise, the economy’s improving.’”

To what extent the overall economy or scrap generation in particular can improve without a construction uptick may become evident in 2011. “Manufacturing is doing well, but by the same token you still have a situation where the housing industry is in distress,” notes Ricchiuto in the same Financial Post article.

On the scrap demand side, steelmaking in the United States began showing seasonal slowdown signs typical of December, but only mild signs. Figures from the American Iron and Steel Institute (AISI) for the week ending Dec. 11, 2010, show domestic raw steel production at 1.68 million net tons for a capability utilization rate of 69.6 percent. That weekly production was down just 0.8 percent from the previous week (ending Dec. 4, 2010), but also represents a 12.8 percent increase from the same period in 2009.

Globally, according to the World Steel Association (Worldsteel), Brussels, steelmakers in November of 2010 produced 114.1 million metric tons of steel, a decrease of more than 3 million metric tons compared to the previous month’s total of 117.4 million metric tons.

China had a slightly lower steel production volume in November compared to October was China. It dipped from making 50.3 million metric tons to 50.17 million. The European Union also demonstrated a slower steelmaking pace in November, dropping to a production level of 14.7 million tons after making 15.5 million tons in October.

Regarding China, scrap recyclers are anticipating demand for ferrous scrap from that country to remain muted in January and early February of 2011, as the nation’s industrial output slows down in coordination with the Chinese New Year. That holiday is Feb. 3, 2011, with companies and workers often taking extended downtime surrounding the holiday.

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.
Dec 27, 2010 15:42
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