Shredding plant operators benefitted from an early November buying period that saw their shredded ferrous scrap rise in value by an average of $20 per ton, producing a second straight month of positive momentum for the grade.
November Midwest Index pricing from Fastmarkets AMM portrayed $20 per ton average increases for obsolete grades (shredded scrap and No. 1 heavy melting steel, or HMS) compared with a price rise of less than $10 per ton for its No. 1 busheling grade.
The relatively good news for ferrous scrap recyclers came amidst a November when news in the wider world was causing uncertainty for investors and political leaders alike. A Great Lakes region recycler says of the ferrous market, “Nothing particularly worries me at the moment, fundamentally speaking.” Beyond the fundamentals of supply and demand, he adds, “Geopolitically, anything can happen and influence markets.”
At the same time the U.S. ferrous scrap market was exhibiting its trademark (in 2018) relative stability in November, volatility was widespread in some other commodities and in stock markets worldwide. As of Nov. 12, the London Metal Exchange (LME) steel scrap contract was trading at $333 per metric ton, down more than 9 percent from its Jan. 1 price of $367 per metric ton.
Tracking done by Gianclaudio Torlizzi of Italy-based T-Commodity was showing downward pressure on the Shanghai Futures Exchange (SHFE) steel rebar contract. In the first 12 days of November, the SHFE rebar contract price fell by nearly 6.5 percent, dropping from $594.63 per metric ton to $556.38 per metric ton.
According to Frederik Husebye of Norway-based Norexeco, the Chinese rebar futures contract was the single most highly traded commodities contract in the world in 2017. (Husebye pointed this out at Recycling Today’s Paper & Plastics Recycling Conference Europe in November.)
Whether Chinese investors’ early November sentiment toward rebar reflects concerns about that nation’s steel industry in particular or instead its overall economy, the fate of steel pricing and output in the country (which makes half of the world’s steel) affects the global market.
“Nothing particularly worries me at the moment, fundamentally speaking. Geopolitically, anything can happen and influence markets.” – a Great Lakes region recycler
While China’s scale makes its steel and scrap pricing footprint important, the nation has become increasingly self-sufficient in ferrous scrap, unlike the industry in Turkey. That nation’s steel sector also is facing uncertainty, according to a Fastmarkets AMM report in mid-November.
That report indicates bulk ferrous scrap buying for Turkish destinations had come to a standstill in the U.S., with those buyers concerned about dropping demand and falling prices for rebar in the region.
The domestic industry in the U.S., meanwhile, has taken advantage of import protection offered by the Trump administration, based on earnings reports from steelmakers and data collected by the industry and government agencies.
Through the first 10 months of 2018, the Washington-based American Iron and Steel Institute (AISI) reported total and finished steel imports of 29.1 million tons and 22.1 million tons, respectively, down by 11.4 percent and 13.3 percent from the same period in 2017.
However, finished steel imports into the U.S. grew by more than 9 percent in October compared with the prior month, and weekly domestic output data from AISI was showing signs that domestic steelmakers may have maximized their ability to benefit from the U.S. tariffs.
In the week ending Nov. 10, domestic raw steel production dropped slightly compared with the week before, and the mill capacity rate also dipped from 81.8 percent to 81.7 percent, according to AISI data.
As Trump administration tariffs have been introduced and held steady this year, the domestic industry’s capacity utilization rate has risen from 70.7 percent in the first week of January to the 81.8 percent peak by the first week of November.
A look back at steel tariffs enacted in March 2002 by the George W. Bush administration demonstrates a record interpreted by some analysts as one of short-term success followed by negative impacts to the wider economy, as well as a thumb’s down vote from the World Trade Organization (WTO). Similar to the 2018 tariffs, those in 2002 ran into opposition from steel users and buyers in the U.S. and from governments of other nations that contended the tariffs violated WTO rules.
In December of 2003, the Bush White House announced the end of the tariffs. A 2003 study, funded largely by steel users going by the name the CITAC (Consuming Industries Trade Action Coalition) Foundation, said of the 2002 tariffs, “Higher steel costs hit American manufacturers of products using steel quickly after the tariffs were imposed, and with force,” and “steel tariffs caused shortages of imported product and put U.S. manufacturers of steel-containing products at a disadvantage relative to their foreign competitors.”
Fastmarkets American Metal Market (AMM) Midwest Ferrous Scrap Index is calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The Fastmarkets AMM Scrap Index includes material that will be delivered within 30 days to the mill. Spot business included after the 10th of the month will not be included. The detailed methodology is available at www.amm.com/pricing/ methodology.html. The Fastmarkets AMM Ferrous Scrap Export Indices are calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value; * FOB New York, in metric tons; ** FOB Los Angeles in metric tons. The detailed methodology is available at www.amm.com/pricing/methodology.html. The grades are based on the Institute of Scrap Recycling Inc. (ISRI) specifications.