ISRI Roundtable surveys tough ferrous scrap market conditions in the US

SEATTLE (Scrap Monster): The ferrous session at the Institute of Scrap Recycling Industries (ISRI) Commodities Roundtable 2016 has acknowledged that the US Ferrous scrap market is currently passing through extremely troubling times. The speakers at the session noted that market faces a host of challenges. The speakers included Doug Kramer, president of Kramer Metals; Charles Bradford, an industry analyst with Bradford Research and Daniel Pickard, an attorney with Wiley Rein LLP.

In his opening note, Doug Kramer focused on the ferrous scrap market conditions in the US West Coast, especially Southern California. The drop in manufacturing sector activities has led to acute shortage of industrial scrap in the region. According to him, the regulatory controls by the administration have impacted the smooth operation of manufacturers. Consequently, there has been a severe drop in the number of manufacturing firms operating in the region. The lack of adequate market for scrap dealers has resulted in huge slowdown in demand for ferrous scrap in California.

Kramer also highlighted that the existing infrastructure and transport facilities in the region doesn’t augur well for scrap dealers to indulge in scrap sales within the region. The profits are hit largely due to expensive transportation options including rail and trucks. This has forced many a dealers to switch to overseas export business. However, the global economic slowdown has impacted the export business badly during recent times. The exports have declined sharply during the past five year period. As per statistics released by the US Department of Commerce (DOC), the ferrous scrap exports by the country have declined considerably from around 6.8 million tons in 2011 to as low as 3.6 million tons in 2015. According to Kramer, the US ferrous scrap exporters are also hit by the rising costs of shipping. The filing for bankruptcy by Korean shipping agency Hanjin has left many containers containing ferrous scrap stranded at seas.

Charles Bradford noted that the impacts of Chinese steel industry on global steel markets will continue to be a major factor driving the ferrous scrap markets. Despite several announcements by Chinese authorities on curbing steel capacities, the country has not witnessed significant reduction in steel output. The Chinese steel products continue to flood overseas markets, including the US. The lack of demand for domestically produced steel poses big challenge for US scrap dealers, Bradford noted.

The country’s ferrous scrap exports to key markets including Turkey has dropped significantly during the past several months. This is despite an increase in ferrous scrap imports by that country. The strong US dollar has made ferrous scrap imports from the US more expensive. As a result, Turkey has started importing more quantities of ferrous scrap from markets outside of North America. Bradford also noted that increased use of billets from China as substitute for ferrous scrap has also resulted in the sharp drop in US export volumes to Turkey. Also, the demand for ferrous scrap at Chinese mills is minimal, as majority of the mills have not yet switched to electric arc furnaces (EAFs).

Pickard highlighted on the series of trade cases that the US have initiated in order to curb illegal imports of products into the country. Despite recent victories on several dumping cases, the domestic market is still not completely free of challenges, he noted.