Renewed interest from some overseas buyers and a willingness by domestic mills to re-enter the market combined to help ferrous scrap prices gain about $20 per ton on average in the United States in the early November buying period.
Fastmarkets AMM showed gains in its Midwest Index prices for ferrous grades and in its East Coast and West Coast export transaction prices.
Price declines of around $40 per ton in October caused instant drops in inventory value for ferrous scrap processors, followed by an accompanying drop in inbound scrap across the scale. “The phone doesn’t ring as much,” says one Midwestern recycler describing business conditions in the previous 30 days.
“Both nonferrous and ferrous [pricing] is down at the same time. Usually, it’s one or the other, not both.” – a recycler based in the Midwest
There seemingly was nowhere to go but up in November, and even a modest increase in demand was helpful in increasing price offers for ferrous scrap as the November market began shaping up during the month’s first and second weeks.
The renewed overseas interest in U.S. ferrous scrap is reflected in Fastmarkets AMM’s East Coast and West Coast export indices, which outpaced gains in Midwest Index figures in November.
While price increases for all three Midwest Index grades (No. 1 busheling, shredded scrap and No. 1 heavy melting steel, or HMS) averaged roughly $20 per ton, the East Coast Index figure climbed by nearly $27, and the West Coast Index figure increased by $25.50.
The East Coast figure was boosted by some bulk cargoes destined for Turkey, while Vietnamese mills engaged in low-price opportunistic buying on the West Coast, according to Fastmarkets AMM.
The domestic steel industry, meanwhile, is struggling to retain the growth momentum initially provided to it when President Trump enacted tariffs on imported steel shortly after he took office in early 2017.
Steel production figures collected by the American Iron and Steel Institute (AISI), Washington, show some fourth-quarter 2019 slowdowns in the sector. According to AISI, domestic steel production of 1.86 million tons in the week ending Nov. 9 represents a 2.15 percent drop from the slightly more than 1.9 million tons produced in the comparable week of 2018.
Output for the week ending Nov. 9 also represented a 1.4 percent drop in output from the week before. As of mid-November, mills in the U.S. were operating at an 80.5 percent capacity rate, which is down from 81.2 percent one year previously and down from 81.6 percent just one week previously.
The Midwestern recycler says the overall operating environment remains difficult for scrap processors. Calling it an “interesting phenomenon,” he says “both nonferrous and ferrous [pricing] is down at the same time. Usually, it’s one or the other, not both.”
The joint beleaguered markets are “creating challenges for some companies, I’m sure,” in terms of cash flow, he says. Most business owners and managers, the recycler says, “have to sell something,” even while taking a loss on the transaction.
The ferrous market’s current weak status, even after the November gains, can be seen when looking at prices from a year ago. In November 2018, No. 1 busheling was trading for slightly more than $400 per ton, a 42 percent bump up in value compared with the $231 price tag it carries this November.
The direction of the wider domestic and global economies—and how those wider conditions will affect commodity pricing—remains a guessing game. Douglasville, Georgia-based steel industry analyst Becky E. Hites of Steel-Insights LLC has encouraged recyclers and steelmakers not to go overboard on gloom and doom in her autumn 2019 presentations.
Hites, who spoke at the Bureau of International Recycling (BIR) meeting in Europe in October and at a steel industry event in Virginia in November, says the U.S. economy continues to chug along with an overall growth rate of more than 2 percent.
She also sees global growth in the scrap-fed electric arc furnace (EAF) steel sector as likely in the approaching decade. (More on Hites’ analysis and on the ferrous scrap and steelmaking sectors overall can be found in the feature article “Looking for the upside,” starting on page 68 of this issue.)
Charlotte, North Carolina-based Nucor Corp. continues to invest in EAF-related technology. It reportedly is working with European suppliers to install EAF melt shop and continuous casting machinery at the 1.2-million-ton-per-year steel plate mill it is building in northern Kentucky.
The prospects for integrated steel mills in North America, meanwhile, are less certain. Media reports in early November indicate Luxembourg-based ArcelorMittal has idled a blast furnace at its integrated northern Indiana complex rather than renovate or replace it.