Scrap has been one the most influential commodities affecting the direction of current US and international steel market prices. On Wednesday, May 4, SteelOrbis hosted an interactive SCRAP webinar presented by David Hodory, Vice President of Marketing and Communications for the David J. Joseph Company (DJJ), a subsidiary of Nucor Corporation to address the state of the scrap market globally, and in the US specifically. During the presentation, individuals across the globe were able to listen to Hodory discuss the how the scrap market has changed in recent years as well as hear his short-term and long-term predictions for the US scrap industry.
Hodory informed attendees that while we have only seen a modest recovery in the US economy since 2008's financial meltdown, "we are coming off a very steep floor," and compared to the global economic recovery, the US has taken longer to recover, particularly when compared to growth in the Chinese market.
Domestically in the US however, recovery in the steel industry is clearly evident. In 2010, US steel shipments swelled almost 40 percent year-over-year, and are forecasted to rise an additional 5-6 percent this year, due heavily to continued growth in the automotive sector.
Growth is especially astonishing in the US scrap market-the number of auto shredders in the US has jumped 62 percent since the early 2000s, said Hodory, which he cautioned has certain implications for pricing. Currently, excluding the EU as one entity, the US is the single largest global scrap exporter in the world-making up approximately 25 percent of scrap tonnage traded worldwide. According to Hodory, the reasoning behind the US' place as a top tier global scrap exporter stem from the simple fact that scrap is the most taxed and tariff-restricted commodity in the world, which "makes the US a good place to source scrap from," in addition to the weak US dollar. And by far the largest recipients of US scrap are consistently China and Turkey.
Another notable trend in the US scrap market in recent years has been the ways in which the highly sought-after commodity is transported. Hodory emphasized that it is "hard to overstate the impact of the container business on scrap." In 2003, scrap was largely a bulk-only traded commodity, whereas the use of containers in the scrap trade is much more common nowadays.
So far in 2011, while the export scrap market has been impacted by currency fluctuation, shipping freight rates, scrap tariffs as well as the situation in the MENA region (Middle East North Africa)-particularly Egypt, which dampened activity and made the global scrap market more uncertain-the US has experienced a robust market.
As for a prediction for the US domestic scrap market and scrap prices going forward, Hodory warned that we have seen "uncharacteristic price stability in the last few months" but the future of scrap prices is much more uncertain. While it is too early to spot the trend, said Hodory, "May looks to be a softer market."
Hodory further addressed the issue of the upcoming scrap trend for May during the question-and-answer portion of the webinar. Hodory noted that the US scrap market is seeing demand moderate on the domestic side, and after a relatively tight Q1 in terms of demand, improving weather has resulted in easier scrap collection. And perhaps most important for listeners is that the trend for scrap going forward is being impacted by the fact that there is more supply of scrap than needed, and less demand than anticipated.