The time is here again for Platts’ scrap and steel conference, which kicked off yesterday with the “Scrap Seminar: Raw Materials Pricing Outlook, Market Trends, and the Surge of Scrap Alternatives.”
We’ll take a stab and guess that the MetalMiner audience may be most interested in the scrap ‘pricing outlook’ and ‘market trends’ components, so we’ve compiled a few key takeaways:
The Big Picture
- Scrap prices may gradually improve, assuming the Fed’s stimulus continues, and as long as taxes don’t go up, geopolitical events stay muted, and sequestration effects are kept at a minimum, according to Don Zulanch of Cohen.
- In the “Indicator to Watch” department, historically, on average, GDP below 2.93% has resulted in contraction of steel usage, according to David Hodory, VP of marketing for David J. Joseph Company (which is owned by Nucor). “Have we missed the seasonally strong part of the year, or are we waiting for it to come?” he said.
- Macroeconomically speaking, Joe Pickard, chief economist for the Institute of Scrap Recycling Industries (ISRI), was on the brink of sounding almost cheery in his outlook – according to Pickard, China appears to have averted a hard landing for now, we’re seeing improving sentiment in some EU countries, the fiscal cliff/debt ceiling crisis put on hold, improving labor and housing conditions continue in the US, and overall there’s a positive outlook for manufacturing.
- However, Pickard also expects lower average year-on-year prices for ferrous scrap, more competition for available supply, and weaker export demand, which will put pressure on the scrap industry and profit margins.
- Timna Tanners, a smart and savvy metals/mining analyst for Bank of America Merrill Lynch (and officially my new crush in the metals world), presented the viewpoint that “when you’re in an oversupplied market…the scrap price will set the steel price, and the margin should remain fairly fixed; this is not a permanent situation, but for now it’s important.”
- Tanners also put her (and her firm’s) thumb in the air – which, according to her bio, has a killer track record – and came down with a long-term iron ore price forecast at around $95 per ton.
- As far as raw material alternatives go, 20 million tons of DRI [direct-reduced iron] by the end of the decade in the US would have a massive impact on cost structure, according to Tanners. “It’s exciting, but change is disruptive,” she said.
More to come from the Intercontinental Mag Mile here in Chicago…