Ferrous Prices Retreat in May, but Rebound Expected in June

Ferrous Prices Retreat in May, but Rebound Expected in June

Spot market pays less for HMS and shredded grades in May, but prices poised to rise in June.

May 31, 2011
Recycling Today Staff
Metals Commodities

Ferrous scrap buyers were able to buy shredded and heavy melting steel (HMS) grades for several dollars per ton less in early May, but as the month ended the two-month pause in pricing seemed about to end.

In the early May buying period, mill buyers were successful in obtaining shredded scrap for about $20 less per ton compared to April, according to the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates (MSA), Pittsburgh. (Click here to view prices).

While shredded scrap pricing lost $18 per ton in value in May and No. 1 HMS prices dropped $14, prompt grades held their value, dropping just $4 per ton on average nationally.

By mid-May, recyclers were reporting two factors likely to cause prices to revive again as mills made their June purchases: flooding hampering barge traffic on the inland waterway system and renewed interest from exporters when prices dipped in April and May.

Delegates attending the Ferrous Division Meeting at the 2011 Bureau of International Recycling (BIR) World Recycling Congress, held May 23-25 in Singapore, heard mostly positive things about the health of the steel and ferrous scrap industries.

Among those offering reports at the late May event was Blake Kelley of Sims Group Global Trade Corp., New York, who noted that scrap prices in North America declined in early May but were rebounding as the month ended.

“There are significant transportation problems both on the inland river system due to severe flooding and high water conditions, while the railroad system is struggling to perform as a result of a fully utilized railcar fleet,” Kelley remarked regarding supply constraints. “Difficulty with both transportation modes is frustrating dealer efforts to complete [delivery] commitments.”

On the demand side, Kelley noted that mills in the United States are running at about 73 percent capacity, with flat-rolled steel in greater demand than long products. While some imported steel is arriving into the United States, the weak U.S. dollar may also be helping exporters. “Service center inventories in April were 2.4 months sales, which is considered a reasonable and healthy level [and] United States steel exports in March were up 19 percent to 1 million metric tons,” Kelley remarked.

Scrap export flows also are healthy, Kelley added. “China and Korea have been aggressively buying and consuming raw materials,” he told delegates. “China reportedly purchased many bulk cargoes with shredded pricing around $480 CIF; South Korea has also purchased many cargoes with heavy melting steel (HMS) prices flat in the mid-$470s CIF.”

Kelley noted that the world’s steelmakers are on pace to produce 1.54 billion metric tons of steel in 2011, a figure that about 111 million metric tons higher than the 2010 output. “An increase of this magnitude in steel production, and its corresponding increase in raw materials consumption, has made for an interesting beginning to the year,” said Kelley, adding that the world’s steelmakers at this pace will consume some 48 million metric tons of additional scrap compared to 2010. “Seemingly, there is enough supply to cover that amount of demand.”

Reporting from the European perspective, Thomas Bird of Van Dalen U.K. Ltd, Stratford-Upon-Avon, England, remarked that a “view of a weaker market in May did not materialize.” He added, “May saw healthy demand across the European Union, with [inventories] at mills running at relatively low levels. The market has taken a little bit of a breather in the last few days, but I do not believe this is anything but just that. Finished product demand remains healthy and we are expecting demand for scrap to remain strong for the immediate future.”

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.