ISRI

If recent industry talk is any indication, it looks as though everyone may as well have curved horns on their head — because the aluminum bulls are out in droves right now.

I attended the Institute for Scrap Recycling Industry (ISRI)’s Commodities Roundtable 2012 here in Chicago, and several aluminum industry players at the conference kept foreseeing supply deficits and talking up strong demand. (Even aluminum expert and noted bull Jorge Vazquez of Harbor showed up, and although he wasn’t technically attending or speaking at the proceedings, it added to the air of bullishness.)

To top it all off, Oleg Deripaska, Rusal’s chief executive, just wrote an opinion piece for the FT, sprinkling his bullish outlook for the metal that his behemoth company produces all over the pink digital pages of that venerable publication. (Of course, Deripaska’s/Rusal’s bullishness is a given; that’s pretty much a prerequisite for producers.)

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June has truly been eventful month for scrap prices.

The recent slide brought ferrous scrap prices to the lowest level since late 2010 — and, according to several editors and analysts speaking during a Platts webinar last week, the months of May and June drove home point of how influential the US East Coast scrap export market is.

The East Coast market is, in turn, influenced primarily by Turkey and India. Turkey, of course, is a huge importer of US scrap, but even scrap dealers can’t effectively forecast what will happen to scrap prices. Jarek Mlodziejewski, an analyst at The Steel Index, said he visited Turkey recently to speak with scrap buyers. “If you ask them they think will happen next week, they just laugh in your face,” he said. It’s such a dynamic market day-to-day now, he said, and macroeconomic sentiment is weighing heavily.

There are other issues that have led to the scrap price volatility the markets have experienced in 2012.

Currency valuation, the weather, scrap inflows, and market sentiment are all short- to medium-term drivers of ferrous scrap prices, according to Nick Tolomeo, associate editor of raw materials at Platts. However, the biggest impact is consumption, especially with the move toward EAF steel production, Tolomeo said. Overall consumption is the ultimate driving force for the supply and price of scrap.

In terms of domestic supply, the speakers indicated there don’t appear to be any shortages of scrap in the US. In 2009, the Institute of Scrap Recycling Industries (ISRI) stated that over 1 billion tons of recoverable scrap are available in the US, so as long as scrap buyers are willing to pay, they can get their hands on the raw material, Tolomeo said. Also, even though export restrictions are of concern to some, US exports of scrap look to continue increasing 5 percent on yearly basis.

Looking forward, when asked if he sees ferrous scrap prices stabilizing over next four months, Mlodziejewski said that prices are up to demand, and that we could potentially see China take more export material in, taking up prices. Turkey will keep needing scrap, but the US economic recovery fragile. As to specific price targets, it’s “anyone’s guess really,” he said. “I throw my crystal ball away and see what happens.”

So how to use hedging in the ferrous scrap market? Unfortunately, the consensus of the panel seemed to be hedging scrap remains a murky landscape, and is essentially still a function of going out to end users and sellers and creating a dialogue with them.

One thing’s for sure, however, volatility in Turkey and other major scrap markets will get buyers and sellers to undertake new supply and price risk management techniques.

Accused of stealing 4 to 6 million dollars’ worth of scrap metal, a father-and-son duo are now facing charges.

According to WSAV 3, the investigation began back in February when authorities acted on a tip that an individual was stealing metal from OmniSource, a scrap metal processing center in the county of Swainsboro and transferring it through another county (Effingham) — avoiding Interstate 16. With this knowledge, Effingham authorities stopped a vehicle — for a bent license tag — that fit the description.

What raised suspicion?

“You don’t use a tandem axel dump bed trailer to haul a little bit of scrap from your yard. It’d cost you more in gas than you’d receive in the metal,” said Effingham County Sheriff’s Deputy Jason Fondren within the article.

After asking the driver, Charles King Jr., 39, permission to search the vehicle, authorities found 55,000 pounds of stainless steel in his trailer.

“It’s hard to have that amount, that much metal in your yard, just sitting in your yard… However you load 55,000 lbs of stainless steal [sic],” said Effingham County Sheriff’s Deputy Matthew Petrea added. (Ed. note: a hilariously fitting, even if unintended, pun in that original quote.)

Deputies were able to determine the scrap metal and trailer had been taken from OmniSource – where King’s father, Charles King, Sr., is manager.

A day or two after they stopped King’s truck, Effingham County Sheriff’s Office obtained information that Jarrell’s Top Dollar Recycling was receiving a significant amount of the stolen metal – leading to an examination of the recycling operation’s records of transactions.

Perhaps these two gentlemen would have benefited from reading “A Thief’s Sourcing Guide to Stealing Scrap” Part 1 and Part 2?

For advice on how your company can combat material theft, visit the Institute of Scrap Recycling Industries (ISRI) website. To report a scrap theft or browse theft reports, visit ISRI’s online alert system, ScrapTheftAlert.com.