Cold comfort in a hot summer
Demolition work across much of the United States has proven to be a hot and sweaty business over the summer of 2022, as intermittent heat waves have made the summer one of the hottest on record. .
Contrary to the weather climate, however, the market for scrap generated during demolition work cooled considerably after the warm winter and spring conditions.
By mid-August, prices for structural plate and scrap (P&S) and heavy melt steel scrap (HMS) were down about $190 a ton from highs reached in March. Remarkably enough, however, the hot, dry weather halfway around the world seemed to provide a reason for the price increases as the hot summer dragged on.
peak in spring
The price of HMS No. 1, as tracked via steel mill purchases by the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based Management Science Associates Inc., began in 2022 at a level likely considered sufficiently encouraging. for demo contractors to harvest scrap steel and quickly bring it to a recycling center.
RMDAS, which trails HMS No. 1 among benchmark grades nationally and in three geographic regions, had the grade starting the year with an average purchase value of $421 per ton. The HMS No. 1 rating remained at this value in February. The note jumped in value in March, climbing 29% to $545 at the start of the March factory buy period.
However, March was the peak for HMS No. 1 as its value fell steadily through April, May and June, with the June buying period dropping below its January price at $395 a ton.
July brought more bad news, with US factories paying an average of just $355 a ton for HMS No. 1.
Commonly exported HMS grades have not fared any better in overseas markets, with the metals news service Davis Index reporting steep price drops it tracks in Los Angeles, New York and other parts of America. export.
Davis Index also tracks P&S grade prices in the United States and around the world, providing a particularly valuable service to demolition contractors. A consumer (mill and foundry) purchase price for 5-foot and shorter P&S scrap value calculated by the Davis Index was $508 per ton in March and $539 in April. Like HMS, however, the grade faltered in the summer heat, falling to $387 per ton on July’s average.
A prolonged drop in scrap metal prices can alter the estimates and calculations that lead to demolition activity in the United States, although the impact usually has a lag of several months. The concern of demolition contractors, however, is that low prices that last longer than about three months can shake the confidence of homeowners who were almost ready to greenlight an industrial or commercial demolition project.
Too hot (and dry) to handle
After price declines from June to early August that led to lower and lower scale prices for scrap harvested by demonstration contractors, a signal for a slight uptick began to appear in mid-August. .
Neither North American mill demand nor the global economy had necessarily improved. On the contrary, a combination of factors led to a decrease in supply which eventually allowed scrap sellers to refuse the lowest offers.
On August 17, Davis Index reported that large-scale traffic in the Houston area, for example, held steady for several weeks in late July and early August, with peddlers staying away from yards for at least two reasons.
Scrap metal dealer and veteran consultant Nathan Fruchter of Idoru Recycling, based in New York, tells Recycling Today (a sister publication of Construction & Demolition Recycling) his assessment of the scrap metal retail business in Europe – who knew a similar series of heat waves – in August.
In comments that might just as well apply to peddlers in the United States, Fruchter says, “The extreme heat on the continent provides a deterrent to some scrap metal drives. With the high fuel prices for trucks, it costs the collector much more to collect his scrap metal and bring it to the job sites. Why? Just to take it to a yard and see a low price? »
A scrap metal processor in the Great Lakes region told Recycling Today that starting in July, he was seeing a change in the supply landscape that should eventually help prices rebound. “Flows are definitely down,” he says. “I would say there has been a reduction of 20 to 30%.”
Scrap generators, including demolition contractors, need cash, so by the third week of August, the Davis Index indicated that slightly larger volumes of scrap were starting to arrive at yards in the United States. .
A drought-related condition in Europe could also spark increased overseas interest in exportable U.S. scrap. Scrap metal prices tracked by the Davis Index showed a price rebound on the Atlantic Coast beginning to emerge in late July. Of the five Davis Index prices released by Recycling Today for its monthly ferrous market update, the only one that rose in July was for bulk export shipments from New York.
The July average for mixed bulk HMS No. 1 and No. 2 cargoes purchased in New York rose 1.6% in July compared to June. This modest increase was largely driven by Indian buyers, traders and recyclers, Recycling Today tells.
After a few shipments were sold in July from the United States to Turkey (the largest foreign buyer of exported American scrap metal for several consecutive years), in early August many Turkish buyers realized they were “Have been out of the buying arena for too long, so they have to buy,” says Fruchter.
Turkey’s economic and geopolitical circumstances might have dictated that factory buyers look to places other than the United States for scrap metal (including Russia), but alternative markets simply would not have been adapted.
In Europe, a long holiday season and rising truck fuel prices had already combined to reduce volumes across the board in July and August.
Another potential problem in Europe emerged from media reports of waterborne shipping conditions on the continent.
During the second week of August, Greece-based Hellenic Shipping News, regarding conditions in Germany, reports: “Weeks of baking temperatures and low rainfall this summer have drained water levels from the Rhine, l commercial artery of the country, causing delays in shipping and more than quintupling transportation costs.
The shipping publication offered an example regarding iron ore that may be equally applicable to scrap metal. “Barges like the Servia, a 135-metre (148-yard) ship transporting iron ore from the port of Rotterdam to German steelmaker Thyssenkrupp’s Duisburg plant can only load 30-40% of its capacity or risk s ‘fail,’ the post read. reports.
This is a circumstance that will make shipping scrap metal to export terminals in northern Europe increasingly unprofitable. With the supply of scrap being stifled in Europe, buyers from factories in Turkey and several other countries who, all things being equal, might prefer European scrap, find themselves for the time being scrambling to source scrap from North America.
American wreckers and other scrap metal producers in the United States who normally do not wish to harm the European economy might have to admit that they would benefit from a Rhine water level remaining low for some time.
However, the steel and scrap market is a global market, and momentum can come and go within days.
At the end of the summer, demolition contractors have seen the results of a bear market and are hopeful that positive price momentum is underway.
Satisfied with the long game
The summer of 2022 might not create fond memories for demolition contractors and other scrap generators who prefer higher scrap prices. Better news for the North American iron and steel scrap market, however, involved a series of announcements by steelmakers regarding ongoing investments in electric arc furnace (EAF) steelmaking. ) powered by scrap metal.
Charlotte, North Carolina-based Nucor Corp., which is America’s largest EAF steel producer, announced this year that it would build a 600,000-ton-per-year smelter in Kingman, Arizona. , providing a much-needed destination for scrap metal. in the western United States.
Steel production in the West lags behind other regions, according to figures from the Washington-based American Iron and Steel Institute (AISI). In the week ending July 30, for example, only 64,000 tonnes of steel were manufactured in the AISI West region. This lags behind 728,000 tonnes in its southern region; 562,000 tonnes in the Great Lakes region; 207,000 tons in the Midwest region; and 166,000 tonnes in the Northeast region.
One of the last plants in California, an EAF plant in Rancho Cucamonga last operated by Commercial Metals Co. (CMC), was shut down in late 2020 after the land was sold last year. CMC attempted to move some of this capacity by increasing its EAF production in Mesa, Arizona. Nucor will now try to boost production in the western United States with the Kingman project.
Nucor is also building a major 3 million ton per year EAF steel plate plant in West Virginia and a steel bar plant in North Carolina with an annual capacity of 430,000 tons.
In Sault Ste. Marie, Ontario, Algoma Steel Group Inc. says it is on track to convert its current blast furnace and basic oxygen steelmaking complex to an EAF steelmaking campus that is expected to have a annual crude steel production of approximately 3.7 million tons.
On the southern border of the United States, Indiana-based Steel Dynamics Inc. (SDI) is ramping up its EAF plant in Sinton, Texas, sourcing scrap metal from across the southwestern United States and in Mexico. “We currently expect Sinton shipments in 2022 to exceed 1.5 million tonnes, reaching approximately 80% utilization by the end of the third quarter and over 90% before the end of the year,” said SDI President and CEO Mark D. Millett.
Investments by these companies and others in scrap smelting capacity can reassure demolition contractors that the steel they harvest will have a ready list of buyers.