At first glance, it might seem as if nothing notable has happened in the world of ferrous scrap over the past 12 months. Heading toward the 7th annual AMM Steel Scrap Conference in Chicago at the end of October, scrap prices are near where they were a year ago.
Prime grades in mid-September were slightly above where they stood a year earlierAMMs No. 1 busheling composite price was about $2 per ton higher--although cut grades havent fared quite as well, with No. 1 heavy melt and shredded down.
But that doesnt tell the whole story. Scrap prices during the past year have experienced periods of volatility punctuated by stretches of calm. Here in elemental terms is the more or less monthly pattern from October 2012 to this September: Down-up-sideways-sideways-down-up-down-down-sideways-up-sideways-down.
While 2011 was mostly calm--six months essentially were sideways and prices changed very little from January to December--and 2012 was extremely volatile (no months were sideways), 2013 has taken a bit from each of those years, making it difficult to anticipate monthly markets.
At the 6th annual AMM Steel Scrap Conference in Philadelphia last November, a North American economy that had difficulty gaining traction was a major topic of conversation. The same was still holding true five months later at the Institute of Scrap Recycling Industries annual convention and exposition in Orlando, Fla., where scrap iron and steel dealers, brokers and buyers werent overly optimistic about their sector through the summer, with buyers reporting weak order books through July. Its going to be a long, hot summer, one buyer said.
Not much about the economy has cleared up since those two major scrap meetings. Unemployment is creeping down, but slowly. The federal budget and debt ceiling are still political footballs. The sequestration has cut seriously into all federal spending, with a subsequent decline in demand for metals.
Some things within the ferrous scrap economy itself arent much more encouraging. The big story has been the continuing drop in export tonnage. Additionally, mill demand for ferrous scrap is on pace to total about 44.6 millions tonnes this year, which would be down more than 10 percent vs. 2012. Furthermore, the nearly universally acknowledged auto shredder overcapacity may mean either harder hits to the price of shredded scrap or, conversely, a drop in the price of prime grades.
But there are some good signs. Auto sales remain strong, housing sales and construction are showing signs of recovery and consumers are spending again. All of these factors and more are sure to get continued scrutiny at the upcoming AMM Steel Scrap Conference.