Summer Heat

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.

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.

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.

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