Vol. 3, No. 4 • April 20, 2012 • Industry Surveys of Factors Affecting the Upcoming May Market
Sellers, buyers differ slightly,
give a mixed message for May
Divided we stand could be the message heading into May.
Sellers solidly believe that prices will go up next month, and
that the increases could be enough to overcome the drops
seen in April.
However, buyers are painting a different picture, and are
forecasting that prices could be sideways to up or down a few
dollars in either direction. There are enough signs pointing to
either competing view of reality to make a strong case for both
sides. The question boils down to whether it will be a demanddriven market or a supply-driven one.
Sellers believe that export, mill and broker demand all will
be strong in May, forcing a competition for available materials.
They mostly believe supply levels will be sufficient or slightly
low. Meanwhile, buyers are generally saying that not only will
demand not be as strong as sellers project, but that scrap
inventory levels at mills, foundries and brokers’ yards will be
large enough to stave off attempts to significantly raise prices.
Numbers & Letters
50
The Scrap Trends Outlook
indicator number for mill production.
Respondents believe that mills, at
least for now, are hitting a ceiling for
raw steel output and that May levels
will be stable. In more long-range
forecasting, however, the survey
shows that market players are upbeat
about production rising later.
↑
May Trend Indicator:
53.5 (Bullish)
5 Key Indicators for May
61.8 (Broker demand) There may be a scramble to get material
61.5 (Mill demand) Even though economy is still creating some doubt,
mill production is gaining and producers need scrap to keep running
60.7 (Export demand) Turkey, China are they keys, as usual
58.9 (Transportation availability) Trucks, trains may be plentiful
45.0 (Mill inventory) This factor could dampen any price increases
Methodology: A numerical value is given to the overall trend for the upcoming month after
all the survey results of a series of 15 indexes (please see pages 4 and 5) are calculated based
on a weighted average. A number close to 50 will give a ‘sideways’ or ‘unchanged’ reading, while
numbers above 50 will give a reading for a bullish trend. The closer to 100, the more likely it is that
prices will trend upward. Conversely, a number below 50 will give a reading for a bearish trend.
The closer to 0, the more likely it is that prices will trend downward. N/A means there were too
few survey responses to publish a reliable figure.
A quick look at key points expected to affect next month’s markets
47
The Scrap Trends Outlook
indicator number for mill orders.
Some fears are beginning to emerge
about the economy. Experts inside and
outside the scrap world believe that
spring could see a slowing of or halt
to the recovery’s momentum, and that
mills will feel this as orders start to
taper off, at least in the short-term.
Historical Trends by Select Grades
Date
.5
During the past decade prices
have fallen across the board in half of
all Mays, while they have risen in four
others and been a mixed bag of ups
and downs in the other year (just last
year, as it so happens). Some
respondents anticipate that next
month could be similar to last year, but
with more of a strong sideways hue.
(How the market has performed in the recent past at this time of year, and
what it may say about the coming month. Source: Scrap Price Bulletin)
No. 1 heavy melting
No. 1 dealer bundles
Shredded
No. 1 busheling
April 2009
$143.17
$162.83
$162.17
$159.17
May 2009
$188.50
$210.50
$212.83
$215.83
April 2010
$375.83
$485.50
$408.83
$488.50
May 2010
$341.50
$448.83
$361.17
$451.83
April 2011
$413.50
$480.17
$452.50
$484.17
May 2011
$402.50
$483.50
$435.83
$482.50
April 2012
$399.17
$449.17
$434.17
$454.17
May Outlook
Bullish
Bullish
Bullish
Bullish
Scrap Trends Outlook • April 20, 2012
2
May Outlook by Scrap Categories
Trends & News
(Scrap Trends Outlook’s quick take on views, attitudes and patterns
that affect the most-traded families of scrap)
PRIME GRADES
CUT GRADES
FRAG GRADES
FOUNDRY GRADES
& MISCELLANEOUS
(includes Busheling,
Bundles, Clips)
(includes No. 1 and No. 2
Heavy Melting, P&S)
(includes Shredded, Other
Fragmented Materials)
(includes Cast Iron,
Machinery Casts, Unstripped
Motor Blocks)
Earlier this year mills were
not buying large amounts of
the prime grades. For one
thing, tons were sometimes
hard to come by. But then
the spread between primes
and obsoletes narrowed,
and mills resumed
purchasing bundles and
busheling. Now they could
become the hottest grades
in the market, and are
expected to rise fast.
What were once the hottest
grades going a few weeks
back have cooled off a bit
of late. So cut grades are
expected to trail the primes
for price strength in May.
Foreign demand for the
80-20 heavy melting mix
in mid-April already had
pushed up demand at export
yards, and domestic buyers
are expected to follow suit
next month.
This month’s hottest grade
is expected to be frag,
primarily because the
overhang that had held back
pricing may be lessening.
In April, a seller dumped an
unexpectedly large number
of tons into the market,
giving the month early
pressure to fall. This is not
expected to be repeated in
May, when demand should
push frag prices higher.
Foundries are running at
good productivity rates and
prices in this scrap category
are high. Many respondents
believe buyers will attempt
to hold out for a sideways
market or, failing that,
minimum price increases.
Demand is strong for
many of these grades, but
because there are so few
buyers, prices often are at
the mercy of the mills.
Scrap
Categories By the Numbers
By
the Numbers
(The Scrap Trends Outlook Index numbers for May broken out by category
of scrap. Numbers above 50 are bullish; below 50 bearish)
PRIME GRADES
CUT GRADES
FRAG GRADES
FOUNDRY GRADES
May Preview
May Preview
May Preview
May Preview
Sellers’ perceptions:
Bullish (58.4)
Sellers’ perceptions:
Bullish (55.8)
Sellers’ perceptions:
Bullish (59.2)
Sellers’ perceptions:
Bullish (56.7)
Buyers’ perceptions:
Bullish (53.9)
Buyers’ perceptions:
Bullish (52.4)
Buyers’ perceptions:
Bullish (55.9)
Buyers’ perceptions:
Bullish (55.0)
Others’ perceptions:
Bullish (57.5)
Others’ perceptions:
Bullish (55.0)
Others’ perceptions:
Bullish (58.9)
Others’ perceptions:
Bullish (55.3)
Overall May trend outlook:
Overall May trend outlook:
Overall May trend outlook:
Overall May trend outlook:
Bullish (57.1)
Bullish (53.8)
Bullish (58.2)
Bullish (55.5)
Taking Account
(A look at how Scrap Trends Outlook Index numbers for April stacked up against
actual changes in last month’s market. Source: Scrap Price Bulletin)
PRIME GRADES
CUT GRADES
FRAG GRADES
FOUNDRY GRADES
April Review
April Review
April Review
April Review
April outlook:
April outlook:
April outlook:
April outlook:
Bullish (53.5)
Bullish (55.1)
Bullish (56.7)
Bullish (52.7)
April’s Actual Change:
April’s Actual Change:
April’s Actual Change:
April’s Actual Change:
Busheling: - $20/4%
No. 1 HM: - $8/2%
Shred: - $7/2%
Punchings: - $10/2%
Bundles: - $15/3%
P&S: - $8/2%
Misc. Foundry: - $15/3%
Scrap Trends Outlook • April 20, 2012
3
Notable Quotes about Next Month
→
→
→
→
→
Raw steel capacity utilization rates are still rising
Mill inventories could increase slightly next month
→
Mill demand is heading in the right direction
Historically, May has been a somewhat weak month
→
Dealer inventories may be stable to down slightly
Home and captive scrap will fill some mill needs
→
Brokers should be looking to secure more material
Transportation availability should improve, making it
easier to close deals and deliver product on time
→
Export is expected to be stronger, especially from Turkey,
but also with the possibility of an uptick from Asia
→
10 Things to Watch in May
Local scrap stores could be adequate for demand
(Selected comments from participants in this month’s market survey)
The trend looks like [it’s] going upwards, the price run
could be a temporary situation; let’s wait to see if more
people decides to dump the old metallic stuff!
Prices seem to be in a bubble. Scrap availability remains
in the same level with just small up and down peaks. Hope
the bubble bangs rapidly and prices stop the upwards run.
Baring any unusual market activity, scrap market
equilibrium should carry into June – the beginning of
summer doldrums
The uncertainty in China has had a negative affect
on this month’s pricing.
Scrap is drying up, we’re using it faster than we can
generate it.
U.S. upcoming elections will cause uncertainty
in the market, causing a wait-and-see situation.
Scrap Trends Outlook • April 20, 2012
4
Perceived May Market Changes
(Scrap Trends Outlook Index indicating perceived changes in market
direction. All perceptions are measured against April levels)
BULLISH
Much
Higher
Higher
Lower
Much
Lower
BEARISH
Much
Higher
Higher
Unchanged
Lower
Much
Lower
Percentage of responses
BULLISH
BEARISH
Much
Lower
Lower
Higher
Perception of Local Scrap
Supply Percentage of responses
Much
Higher
Much
Higher
Higher
Unchanged
Lower
Much
Lower
BEARISH
Perception of Total Mill Orders
Unchanged
BULLISH
Lower
Much
Higher
Higher
Unchanged
BEARISH
Lower
Much
Lower
Percentage of responses
BULLISH
Perception of Dealers’ Yard
Inventory Percentage of responses
Unchanged
Perception of Export Demand
BEARISH
Higher
BULLISH
BULLISH
(Scrap Trends Outlook Index indicating perceptions of market factors.
All perceptions are measured against April levels/situations)
Perception of Service Center
Demand Percentage of responses
Much
Higher
Much
Higher
Higher
Unchanged
Lower
Much
Lower
BEARISH
BEARISH
Unchanged
BULLISH
Index of May Market Factors
Perception of Steel Mill
Production Percentage of responses
Much
Lower
Lower
Higher
BEARISH
Much
Lower
BULLISH
Unchanged
BEARISH
Much
Higher
Percentage of responses
Much
Higher
Percentage of responses
Higher
Percentage of responses
Unchanged
Perceived Change in Prices
Lower
Perceived Change in Supply
Much
Lower
Perceived Change in Demand
BULLISH
Scrap Trends Outlook • April 20, 2012
5
Index of May Market Factors
BEARISH
Much
Lower
Lower
Unchanged
Higher
Much
Higher
BEARISH
BULLISH
Change in Historical Factors*
BEARISH
Much
Higher
Higher
Lower
Percentage of responses
Much
Lower
Much
Lower
Lower
Worse
Much
Worse
BULLISH
Perceived Change in Alt. Irons
Demand Percentage of responses
Unchanged
BULLISH
BULLISH
Perceived Change in
Transportation Percentage responses
Much
Better
Much
Worse
Worse
Unchanged
BEARISH
Better
Much
Better
Perceived Change in Seasonal
Factors Percentage of responses
Unchanged
BEARISH
Unchanged
BULLISH
Higher
Much
Higher
Much
Lower
Lower
Perceived Change in Home
Scrap Percentage of responses
Better
BEARISH
Unchanged
Higher
Much
Higher
Perceived Change in Mill
Inventory Percentage of responses
(Scrap Trends Outlook Index indicating perceptions of market factors.
All perceptions are measured against April levels/situations)
BULLISH
* Changes in price & tonnages for each April-to-May market period
over the past ten years. Source: Scrap Price Bulletin
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Scrap Trends Outlook • April 20, 2012
6
Outlook by Region (based on weighted averages of survey responses)
Northeast
Midwest
South Atlantic
South
West
All Regions
Mill Factors
53.1
50.4
54.2
50.0
50.0
51.5
Service centers
50.0
Exports
56.3
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
51.3
Dealer inventory
50.0
55.0
75.0
50.0
50.0
56.0
Brokers
68.4
62.5
75.0
70.8
50.0
65.3
Overall Market
56.0*
52.4*
63.4*
52.6*
46.1*
53.5*
* Weighted averages of all survey factors, including those not listed on this table
Outlook by Scrap Purchaser* (based on weighted averages of survey responses)
Consumer
Demand
Inventory
Home Scrap
Orders
Production
Overall Trend
Integrated Mills
50.0
50.0
50.0
50.0
50.0
50.0
Mini-Mills
50.0
50.0
50.0
41.6
50.0
48.3
Foundries
50.0
37.5
50.0
50.0
50.0
47.5
Export Yards
50.0
50.0
NA
50.0
NA
50.0
Brokers
62.5
45.0 NA
65.0
NA
57.5
Overall Market
52.5
46.5
50.0
51.3
50.0
50.7
* Weighted averages of the survey factors included only on this table
Outlook by Scrap Seller* (based on weighted averages of survey responses)
Seller
Mill Demand
Inventory
Local Scrap
Exports
Mill Production
Overall Trend
Generator
53.2
Processor
50.0
47.0
43.8
50.0
50.0
48.8
50.0
50.0
50.0
50.0
50.0
Dealer
61.1
55.6
53.2
58.3
66.7
59.0
Export Yards
50.0
50.0
50.0
50.0
50.0
50.0
Brokers
62.5
45.0
50.0
65.0
65.0
57.5
Overall Market
55.4
49.5
49.4
54.6
56.3
53.1
* Weighted averages of the survey factors included only on this table
Methodology: For the above tables, a numerical value is given to the overall trends in each category for the upcoming month after all the survey results of a series of 15 indexes are calculated based on
a weighted average and then broken down by region, consumer or seller. A number close to 50 will give a ‘sideways’ or ‘unchanged’ reading, while numbers above 50 will give a reading for a bullish trend. The
closer to 100, the more likely it is that prices will trend upward. Conversely, a number below 50 will give a reading for a bearish trend. The closer to 0, the more likely it is that prices will trend downward. N/A
means there were too few survey responses to publish a reliable figure, or that the category did not apply to the type of business being surveyed.
Regional Views
Different factors in markets across North America
Northeast: Overall demand is expected to be higher here in
South: Most factors are expected to be stable in May, other
South Atlantic: Expectations for price increases are higher
West: If demand stays flat as expected, this region could
May, which could force prices up. Beyond that factor, supply
is expected to stable, which could cap those increases.
in this region than anywhere else in the country. Broker
demand may increase, supplies could be lower next month.
Midwest: Stronger broker and mill demand are expected
to drive market factors here, although respondents said they
would not be surprised if scrap moved sideways to up only a
few dollars because local inventories could rise in May.
than an expectation that broker demand will be up solidly. So
respondents say a strong sideways market could be in order.
become one of the weakest in the country next month.
Canada: The prices of most grades are expected to increase
next month, although cut scrap could be sideways.
Mexico: Prices are expected to be up slightly next month as
mills are looking to increase production and secure scrap.
Scrap Trends Outlook • April 20, 2012
7
Long-Range Outlook
↑
June Trend:
62.6
(Bullish)
↑
(Scrap Trends Outlook Index numbers for the next 2, 3 and 6 months)
July Trend:
64.2
(Bullish)
↑
6-Month Trend:
68.4 (Bullish)
Key Indicators for June
Key Indicators for July
Key Indicators Over 6 Months
Export demand is expected to increase
dramatically in the coming weeks
Mill inventory levels may start to decrease
Export demand is expected to increase
dramatically by the late fall
Local scrap inventories should be stable
Mill orders are expected to be much stronger
Alternative irons demand should increase
more substantially in the coming months
Summer weather will continue to improve the flow of scrap into sellers’ yards
July often sees mixed pricing movement
Capacity rates are expected to continue their
climb, but no one is sure how high they will go
Service center demand is expected to increase dramatically in the coming months,
creating more demand for mill production
Mill production will rise in the near future
→
Historically, prices stay strong during the second quarter
→
Growth in Asian markets could drive stronger demand
→
The mills are busy and the rate of utilization continues to
inch its way back toward pre-recession levels
→
Export demand is expected to remain strong into spring
and into the early part of the summer
→
Although a full recovery may yet be months away or
longer, economic indicators are pointing upward
→
Top Issues Over Next 3 Months
Although May could be sideways to up, many expect
long-term steady markets in a repeat of mid-2011
→
The election year is likely to bring some volatility in
market reactions and political gamesmanship
Dealer yard inventories may hold steady
Historical figures predict a strong 4th quarter
Election year politics are expected to affect
decisions made in Washington on the economy
Approach of winter slows prices down just
ahead of what has become annual year-end boom
Viewpoints on the Next 6 Months
If prices stay steady after the current bubble, in two
or three months these could be ‘settled’ for awhile but
remaining higher than now; transportation prices could
not be a problem.
Scrap prices are depressed now mainly due to
nonexistent export. Once export takes off as a result of the
low cost of U.S. scrap, we will see large market uptick.
The reality is we are still not out of the RECESSION. The
presidential election will mask a lot of the true picture.
By then we’ll be coming out of a summer lull, headed
upward slightly.
The next issue of Scrap Trends Outlook will appear May 21
and look at perceived June trends.
that the information is correct and that the views are sound,
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