Demand for ferrous scrap decreased notably in the August buying season, which resulted in lower per-ton pricing and, in some cases, scrap yards with considerable inventory on the ground.
Processors and shippers began reporting in early August that domestic mills were cutting back on orders, with many steel mills taking maintenance shutdown time starting in late July and into August.
WEAK SEASON
The skid in domestic demand was coupled with a slump in export demand as well, with many Turkish buyers having taken the summer off. Much of China’s metals industry also spent August in snooze mode, especially in the northern part of the country, so as not to contribute particulates to the air during the Olympics in Beijing.
The combination of factors led to domestic scrap prices losing as much as $62 in value in August compared to the month before. Figures compiled by Management Science Associates (MSA) for its Raw Material Data Aggregation Service (RMDAS) showed shredded scrap being purchased for an average of $55-per-ton less on the spot market in August.
Those figures may not truly reflect the drop in the market, according to one recycler, who says that buyers in late July and early August were paying more per ton (bringing up the average), but transactions made in mid-August reflected even lower ferrous pricing.
The No. 1 HMS (heavy melting steel) grade lost value on par with shredded scrap, with buyers paying an average of $53-per-ton less nationally.
CAUSES AND EFFECTS
From the perspective of a scrap recycler in Ohio, the overall affect has been significant. "Everything has gone down like a ton of bricks," he said in early August, saying mills and brokers were offering to buy some grades at from $100 to $150 less than 30 days earlier.
Steel Dynamics Announces Organization Changes Steel Dynamics Inc. (SDI) has announced realignments in its executive management structure. Under the new organization, each of the company’s three current executive vice presidents will assume new responsibilities for various segments of the company. The company also has announced additional corporate management appointments. SDI’s OmniSource division, based in Fort Wayne, Ind., is one of the largest buyers and sellers of scrap metal in the United States, with its heaviest presence in the Great Lakes region and in the Carolinas through its Recycle South affiliate. • Mark Millett has been named executive VP for Metals Recycling and Ferrous Resources and also becomes president and COO of OmniSource Corp. Millett will retain his responsibilities for the company’s iron-making projects, which currently include Mesabi Nugget and Iron Dynamics, as he takes on the additional OmniSource role. Richard Teets becomes executive VP for Steelmaking and president and COO of Steel Operations. In this role, Teets will lead all of the company’s steelmaking operations, including the Flat Roll Division and The Techs, which formerly reported to Mark Millett. Gary Heasley continues as executive VP for Strategic Planning and Business Development, and also takes on responsibility for New Millennium Building Systems, the company’s joist-and-deck fabricating business. "The changes announced provide our senior executives the opportunity to focus on specific segments of the company’s business," says Keith Busse, SDI’s CEO. "For our raw materials platform, Mark Millett has the unique strengths that will allow us to take full advantage of the opportunities in growing and integrating OmniSource with Steel Dynamics, as well as to continue to develop and implement our critical iron-making initiatives. " In addition: Ben Eisbart, has been named VP of Human Resources. Eisbart, who joined OmniSource in 1992, held the position of executive VP for Administration and Corporate Compliance Officer. Brent Ritenour has been promoted to VP, Internal Audit. David Bednarz has been promoted to vice president—Iron Resources, reporting to Mark Millett. Since 2000, Dave has managed the company’s Iron Dynamics operation which produces liquid pig iron for the Flat Roll Division. In his new role, he will continue to be responsible for Iron Dynamics, with the added responsibility for the Mesabi Nugget iron-making and mining projects. The moves take place after several executives and managers with roots with OmniSource left the company earlier this year. According to June report in the Journal-Gazetter of Fort Wayne, brothers Daniel, Marty and Rick Rifkin, along with three other OmniSource veteran executives, left the company because of "philosophical differnces" that had become evident since the acquisition of OmniSource by SDI.
RMDAS figures for the North Midwest region (which includes Ohio) showed actual spot purchases in August averaged from $50- to $59-per-ton less across all three grades.
A scrap processor near the East Coast was seeing price decreases that were not quite as dramatic in mid-August and one positive sign in the market. "A Turkish buyer bought in bulk off the East Coast, and that was the first one of those orders placed in awhile."
However, he notes that the price paid for that shipment of shredded scrap was in the $560 range delivered to Turkey, which matches the downward trend in the domestic market.
The lack of overall demand for ferrous scrap has been significant enough to affect operations. "Our yard was so full we stopped deliveries for awhile," the East Coast recycler remarks "There is a lot of scrap in the market, which has allowed the mills to push prices down."
A recycler in the South has seen the same factors in play in his region. "There is scrap going unsold," he states. "After several mills announced at the end of July that they are taking some downtime, it sent a signal to the market."
The early part of September is being met with anticipation, as shippers will find out whether either domestic mills, overseas brokers or both will renew their buying activities. "We’re probably already close to a short-term bottom, maybe September could be lower," predicts the East Coast recycler.
The setback could be temporary, he adds. "The overall demand fundamentals are not changing much." C&DR
The author is editor in chief of C&DR and can be contacted at btaylor@gie.net.
More information on the latest pricing for ferrous and nonferrous scrap metal is available online at C&DR's sister publication's Web site www.RecyclingToday.com.
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