September Scrap Market Conditions
Summer has come and gone leaving the ferrous and non-ferrous scrap markets in the best shape we have seen in the last six months. The Institute of Supply Management reported that our domestic Purchasing Manager’s Index (PMI) increased from 54.2 in July to 56 in August. Additionally, most of the major economies around the world also showed expansion with numbers above 50 (any number above 50 indicates expansion). China’s PMI rose to its highest level in over 9 years driven by both domestic and export demand for their finished goods and Turkey's economy continued to improve with stronger domestic and export demand for finished steel products with help from a weaker Lira.
As September approached, domestic ferrous scrap prices were in position to move upward propelled by increased domestic and overseas demand competing for smaller scrap supplies created by lower summer intake volumes. Domestically, the Detroit and Chicago markets had to play catch up with flat to lower August prices, the Southeast has Big River and USS bringing two large EAF online this month, the Southwest market has Mexico aggressively pursuing scrap, and the East and West Coast has continuing strong export demand from Turkish and SE Asian steel mills. The bottom line is the steel mill utilization rate increased to 63.7 last week, there is increased demand for finished steel products led by the automotive sector, and simply put, demand is exceeding supply. Prices in the Midwest finished up $20-$40GT, up $30-$35GT in the Southeast and Southwest, and $20-$25GT on the East and West Coasts. Looking forward, prices should remain strong through October.
Non-ferrous scrap prices continue to move upward supported by strong terminal markets in aluminum, nickel, and copper all of which are in the range of 9-10 month highs. Demand for non-ferrous scrap is increasing both domestically and overseas.
The scrap aluminum market is showing the most strength with the LME rising over 1800 before settling in the high 1700’s last week. In addition, the Midwest premium rose to a high of 15.20 before settling at 15.15. Demand for extrusions and segregated alloys remain strong with domestic mills aggressively looking for scrap. Secondary prices are being bolstered by the recovery of the automotive industry coupled with strong demand from India, Malaysia, Korea, Japan, Taiwan, and China.
300 series stainless steel scrap prices continue to rise in conjunction with LME nickel hitting a 10 month high of $7.00 lb. and rising ferrous scrap prices. Domestic stainless steel mills's order books are filling up resulting in increased demand for scrap. 400 series stainless steel scrap prices have also had a nominal price increase primarily due to the increase in ferrous scrap prices.
LME copper prices popped over the $3.00 lb. level last week for the first time in over 2 years driven primarily by news that China’s manufacturing activity in August grew at the fastest rate in over 10 years. Strong Chinese demand for copper units has pushed LME prices higher over the last four months. Scrap copper and brass prices remain strong and should weather the current regulatory shipping issues without much downside risk.
Finally, a few words of caution. Our economy still has a long way to go before it returns to pre Covid-19 levels. Unemployment in the United States remains above 15,000,000. When we finally put the Covid-19 pandemic behind us, the job landscape will be quite different with an untold number of pre Covid-19 jobs no longer existing. It remains to be seen how everything will shake out. For the time being, we should be grateful for what we have and do our best to make things better.