The following article was published by Recycling Today after attending the ISRI commodity conference in Chicago this past week. Steel Market Update participated in the ferrous roundtable portion of the conference and here is what Recycling Today had to say about our discussion:

While American manufacturing and steelmaking activity remains sluggish, the rest of the world continues to place significant orders for ferrous scrap.

Speaking to attendees of the Ferrous Roundtable at the 2009 ISRI Commodities Roundtable Forum, Patrick McCormick of World Steel Exchange Marketing, Englewood Cliffs, N.J., remarked that ferrous scrap exports from the United States have returned to the large volume levels they reached in the first half of 2008, when ferrous scrap pricing reached historic highs.

McCormick and other panelists pointed to several market fundamentals that have allowed ferrous scrap pricing to remain strong even while steel mills in North America and Western Europe operate well below their productive capacities.

The economy in the United States is not necessarily one of the factors causing optimism. John Packard of the Steel Market Update news service remarked that his own surveying of manufacturers and steel service centers shows almost no expectation of a “V-shaped” or fast economic recovery.

He told attendees that just 1 percent of respondents to his survey are predicting a V-shaped recovery and only 27 percent a U-shaped pattern, which also implies steady recovery. Some 37 percent foresee a jagged W-shaped recovery while another 35 percent see an L-shape that won’t involve a recovery anytime soon.

Packard says he sees a U-shape that “seems to be bottoming out right now.” He added, “We’re going to bounce along the bottom for a while.”

Regarding the domestic economy, Mark Millet of the OmniSource division of Steel Dynamics Inc. (SDI) commented on his disappointment as to how little of the federal government’s $700 billion stimulus package was directed toward infrastructure projects. This contrasts sharply with China’s emphasis on roads, bridges and power grid projects.

Sources of optimism remain overseas, in the form of expanding electric arc furnace (EAF) capacity throughout the world, with the notable exception of China. But McCormick noted that even though China has largely built basic oxygen furnace (BOF) mills, when scrap prices dropped sharply last year, producers in China “saw a great buying opportunity” and began buying more scrap as feedstock for BOF mills.

Panelist John Kopfle of Midrex Technologies, a maker of alternative iron production systems, sees more EAF growth outside of China, and perhaps within China if carbon emissions become a consideration there. “DRI (directed reduced iron) and HBI (hot briquetted iron) are in a good position going forward,” he remarked.

Millet of SDI says his company foresees continuing pressure on scrap supplies, which is why it has invested in alternative iron technology at its Indiana mills as well as in the Mesabi Range of Minnesota. The company’s Iron Dynamics technology can produce EAF feedstock that costs about $320 per tons, says Millett, a price that is at the upper end of ferrous scrap’s historic range but well below the high prices reached in early 2008.

One additional external factor, first mentioned by McCormick, is that if the U.S. dollar remains weak against other currencies, this will favor U.S. scrap exporters.

Both McCormick and Millett also remarked that they expect that ferrous scrap will continue to be shipped overseas in containers. Millett noted that this practice has helped open up the interior United States as an export market, while McCormick commented that transportation managers in China also see it as a way to ensure that shipping containers return more quickly to their nation.

The 2009 ISRI Commodities Roundtable Forum was held Sept. 15-17 in Chicago.

If you are interested in reviewing the results of last week's market survey we have a number of graphs taken directly from the survey in the Media Center section of our website. Look under "files" and "review gallery" to find the most recent graphs as well as other market survey results and past presentations made by SMU.

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