We have to admit we find it refreshing reading the ISRI weekly Friday reports. Why refreshing you may ask? We like reading upbeat reports written in a glass-half-full sort of voice. Sometimes we struggle to strike the right balance on tone between reporting on some of the negative economic data we see and at the same time continue to look for positive news to report on as well. This week’s scrap numbers and trends suggest looking down that road in the middleÂ¦
Demand for steel, according to the World Steel Association will hit 1.34b metric tons in 2011, a 5.4% increase from 2010. ISRI reports that the demand increases will come from China, Brazil and even the US and EU, though at a slower rate. India will also see noted increased demand perhaps up to 13.6% next year while Japan’s demand will likely slow due to its appreciated currency and weak construction markets. Though demand (and growth) numbers appear positive, actual ferrous scrap prices appear to have trended lower in recent days. According to MEPS, prices appear as follows:
HMS No. 1 $350-360 MT FOB
HMS No 2 $360-370 MT FOB
Platts reports Midwest shredded scrap at $345/ton. Scrap Price Bulletin also reports declining prices. How will this impact HRC prices? According to ISRI, Steel Business Briefing reports the spot market at $580-600/ton FOB and AMM reports HRC at $560/ton “down $29/ton from two weeks ago.
Our own MetalMiner IndX(SM) free to all registered users reports HRC in China at $619.99/ton, down from $647.87/ton one month ago.
ISRI reports multiple sources pointing to bullish copper forecasts for the year ahead. Scotia Bank expects an average cost next year of $3.60/lb and Morgan Stanley concurs with the same average cost. Goldman Sachs, on the other hand, calls for copper to reach $4.22/lb exceeding all price records. Macquarie also calls for copper prices to trade between $4-5/lb next year.
Ironically, despite the bullish copper indicators, the scrap markets have witnessed larger spreads than one would expect, however, demand may have fallen due to the Chinese Golden Holiday break.
Aluminum, taking some of its pricing cues from the copper market has also risen, mostly due to a falling dollar as well as some increased demand as we noted in our MetalMiner Aluminum Pulse report of last week. Not surprisingly, aluminum scrap markets have tightened as prices have inched higher for old sheet and cast (ISRI reports prices in the $.70/lb range, delivered Midwest). ISRI also notes additional talk of “tightness in the market for aluminum scrap and raw material price increases.