Although demand for most steel products in the United States remains soft, there are several factors which could contribute to a continuing upward trend for US scrap prices, according to David Hodory, Director of Marketing and Communications for David J. Joseph Company (DJJ).
In his presentation on the scrap market given at SteelOrbis' second-annual Steel Trade Conference of the Americas held Wednesday, July 29 in San Diego, California, Mr. Hodory said that the US is likely in for a two-to-three-year trough in scrap collection, and that the US has also been exporting an increasing portion of its scrap collection.
Mr. Hodory said the US has been a net exporter of metallic raw materials since 2007, and that approximately a quarter of the amount of scrap collected in the US in 2008 was exported. The surging economies in developing regions of the world like China and India in recent years have been the main drivers of this trend, Mr. Hodory explained.
The recent proliferation of container transportation has also changed the game, as containers provide scrap dealers from any part of the country, even inland locations, access to the export business.
The reduced amount of US automotive production is also resulting in less generation of prime grade scrap. For obsolete scrap (recovered from steel products that have reached their life's end), there are a separate set of factors unrelated to prime scrap, though collection of obsolete scrap is also projected to remain subdued, while the number and capacity of shredders will also put added upward price pressure on obsolete/cut-grade scrap, said Mr. Hodory.
However, there are some negative factors that could affect US scrap as well. DJJ's US GDP growth forecast for 2009 is -2.9 percent, and it is not clear when steelmaking capacity rates will start to rise again, as steel demand remains fundamentally weak. Still, with domestic demand trending slightly up, and domestic supplies shrinking, there are more positive price pressures than there are negative, Mr. Hodory illustrated in a chart of influential factors. The “rogue factor” for US scrap going forward is exports, according to Mr. Hodory.
In the short term, Mr. Hodory expects to the US scrap market to be in a “re-stocking” mode over the next two months.
DJJ is a processor and trader of ferrous scrap, with a network of nearly 60 ferrous scrap processing operations in the US. DJJ operates 11 ferrous brokerage offices in the US and one international ferrous brokerage office in China.
The complete PowerPoint presentations of all of the speakers at SteelOrbis' Steel Trade Conference of the Americas, along with pictures of the event, will be made available to attendees at www.steelorbisevents.com .