The past 18 months or so have
shown just how important exports are to the health of the U.S.
ferrous scrap industry.
Export volumes last year fell to
a two-year low and have been somewhat sluggish so far in 2013,
while prices have dropped about 28 percent since January 2012
through May of this year. So whats to be expected for the
rest of this year? The question is directly related to the fate
of domestic scrap prices.
Increases in domestic scrap
values have mirrored the rise in the average price of exported
scrap over the past decade or so. Talk to just about anybody in
the ferrous scrap business in North America and youll
hear pretty much the same refrain: The strength of the market
going into summer is going to depend pretty much on
The most recent export numbers
hold both good news and bad news for scrap buyers, brokers and
The good news is that March 2013
was the strongest month since last August, with 1.96 million
tonnes of ferrous scrap shipped offshore, putting the
year-to-date total virtually even with the first three months
of last year, according to the latest data from the U.S.
The bad news is that the
21.36-million-tonne export total in 2012 was nearly 3 million
tonnes below overseas shipments in 2011.
The other piece of bad news in
the export business is that China has yet to regain the
strength it showed in 2010 and 2011. China took 546,549 tonnes
of ferrous scrap from the United States in the first three
months of this year, down 18 percent from 666,245 tonnes in the
same period in 2012 and 42.7 percent below 954,288 tonnes in
the first quarter of 2011.
Much of that slack has been
taken up by Turkey, which purchased 1.64 million tonnes of
ferrous scrap from U.S. suppliers in the first quarter, up 7.2
percent from a year earlier.
These trends have been among the
leading indicators for the domestic ferrous scrap market over
the past few months. The price declines that came in April and
May followed weaker export pricing. When prices fell slightly
across the country in February, a major contributing factor was
the continued indeterminate nature of the ferrous scrap export
market in both tonnage and dollar value. In fact, as deals were
being closed during the first two weeks of February, there was
a major question on the minds of many market players: When will
truly stronger and lasting export demand and pricing
Prices are driven by foreign
demand, and that demand historically has been driven by when
and how Turkey and China decide to participate in the market.
Turkey has a history of monitoring the U.S. scrap market and
swooping in to make buys when prices are on the decline. This
scenario played out in February 2010 and February 2011; as
prices fell domestically, Turkey and even China picked up their
buying programs heading into March of those years. But there
was no such bounce this March.
Going back a bit further, ahead
of both December and January many market players anticipated
increases in the value of scrap, only to find prices sideways
or up only slightly in certain regions. February took that
trend to new market lows.
In mid-January, many in the
market believed that February would rise, but that view began
souring at the end of the month. One of the reasons the market
was softer than expected was export demand. After modest gains
in December, prices in mid- to late January slipped anywhere
from $10 to $15 per tonne on cargoes leaving from both the East
and West coasts. Because of this and other key factors, the
February market started out with a template for lower
Although export demand has been
ticking up a bit lately, overall export figures havent
been encouraging. Last November, for example, 1.38 million
tonnes of ferrous scrap left the United States; in the past
four years, only January 2011, January 2010 and January 2009
saw less scrap move from ports. For all of 2012, exports were
12.1 percent behind the previous year, although they still
surpassed 20 million tonnes for the fifth consecutive year.
Going back slightly further
helps to solidify the point. Despite a mostly stagnant start to
October 2012, international scrap buying started to show some
signs of life as prices inched up on the East Coast. Prices for
No. 1 heavy melting scrap were up slightly at New York and
Philadelphia export yards, and Boston and Gulf Coast exporters
followed suit heading into November. By the time all of that
export demand was felt inland, November domestic scrap prices
When scrap prices last October
hit their lowest level in about two years, the absence of
exports as a significant force in shaping monthly markets was
one of the main reasons cited, along with recent drops in mill
Were used to
fluctuations in mill (scrap buying) programs. Thats going
to change with the time of year and other fairly predictable
factors, one East Coast dealer said. But we had
come to rely on exports being there as a safety valve for
prices over the past three years. Now we just dont know
whats going to happen next.
So recent talk about possible upturns in export demand
heading into this summer is being read by many in the market as
a sign that scrap prices might have bottomed out and are ready
to start climbing during the June-to-August market period.