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Vol. 6, No. 10 • Oct. 21, 2015 • Industry Surveys of Factors Affecting the Upcoming November Market
November market could sink again as demand falls
The debate in the ferrous scrap market heading into November is not whether prices will fall yet again, but rather if the scrap market will reach its bottom next month.
After an October in which prices fell hard, expectations are that November will see another decline. In fact, less than two percent of all respondents say they believe prices might go up. This is due in large part to a continuing decline in export demand and an expected large drop in mill demand for scrap.
If there is any silver lining from respondents to the November Scrap Trends Outlook survey, it is that they believe prices will begin
to rebound at the beginning of 2016.
Demand for scrap is expected to be down seriously among mills and brokers in November. With the exception of the prime grades, scrap is in a supply-and-demand balance right now, so any loss in demand is expected to drive prices down.
These declines could be followed by a weaker December, most survey respondents say, although they expect the next six months to offer some relief for sellers.
As for next month, purchasers and sellers of scrap are in near identical agreement about the anticipated market weaknesses.
40.1 (Bearish)
Methodology: A numerical value is given to the overall trend for the upcoming month after all the survey results of a series of 15 indexes (please see pages 4 and 5) are calculated based on a weighted average. A number close to 50 will give a ‘sideways’ or ‘unchanged’ reading, while numbers above 50 will give a reading for a bullish trend. The closer to 100, the more likely it is that prices will trend upward. Conversely, a number below 50 will give a reading for a bearish trend. The closer to 0, the more likely it is that prices will trend downward. N/A means there were too few survey responses to publish a reliable figure.
5 Key Indicators for November25.0 (Mill production) Output should be down in the coming weeks
38.1 (Broker demand) Buyers are not looking for much ferrous scrap
38.3 (Export demand) Foreign purchasers are still primarily pulling back
from the market, removing a potential destination for unsold materials
41.6 (Mill inventory) Scrap on the ground will help diminish market need
56.6 (Local scrap) Local supplies will be low, but it may not matter
Historical TrendsHow the market has performed in the past and what it may say about the coming month.
Prices are just as likely to fall in a November as they are to rise. Prices have fallen across the board in five of the past 10 November markets. They did rise in 2012 and 2013 before falling last year. When prices do fall in November they do not tend to the extremes; most decreases over the past decade have been within 10 percent, with the exception of 2008.
The Scrap Trends Outlook indicator number on average for mill factors, which take into account anticipated mill scrap demand plus expected levels of production, orders, mill inventory, home scrap levels and any slowdowns or shutdowns. All of these point to a severe decrease in the need for scrap among buyers in the market, undercutting prices.
The percentage of respondents in this month’s survey who expect prices to fall. An additional 26 percent say prices could be sideways or soft sideways next month. Prime and shredded grades lead the way in expected market declines, with foundry grades also expecting to be weaker. That leaves only 2 percent of respondents looking for an increase.
Numbers & Letters A quick look at key points expected to affect next month’s markets.
October 2012 $304.17 $331.17 $331.83 $341.17
November 2012 $347.50 $365.83 $385.17 $377.50
October 2013 $334.17 $385.83 $356.17 $397.50
November 2013 $360.83 $407.50 $384.17 $420.83
October 2014 $342.50 $389.17 $355.83 $395.83
November 2014 $312.50 $355.83 $324.17 $362.50
October 2015 $152.50 $172.50 $174.83 $183.17
November Outlook Bearish Bearish Bearish Bearish
Source: Scrap Price Bulletin.
Date No. 1 heavy melting No. 1 dealer bundles Shredded No. 1 busheling
50 41 72
NovemberTrend Indicator:
Scrap Trends Outlook – October 2015
2
Includes Busheling, Bundles, Clips.
Includes No. 1 and No. 2 Heavy Melting, P&S.
Includes Cast Iron, Machinery Casts, Unstripped Motor Blocks.
PRIME GRADES
PRIME GRADES
PRIME GRADES
FRAG GRADES
FRAG GRADES
FRAG GRADES
CUT GRADES
CUT GRADES
CUT GRADES
FOUNDRYGRADES
FOUNDRYGRADES
Trends & News by Scrap Grade A quick take on views, attitudes and patterns that affect the most-traded families of scrap
By the Numbers
Taking Account
Scrap Trends Outlook Index numbers broken out by grade. Numbers above 50 are bullish; below 50 bearish.
October outlook:
Bearish (39.3)
October’s actual change:
Busheling: - $52/22%
Bundles: - $52/23%
October Review
October outlook:
Bearish (36.0)
October’s actual change:
No. 1 HM: - $47/23%
P&S: - $48/22%
October Review
October outlook:
Bearish (37.4)
October’s actual change:
Shred: - $50/22%
October Review October Review
Overall trend outlook:
Bearish (30.9)
Sellers’ perceptions: Bearish (31.6)
Buyers’ perceptions: Bearish (28.9)
Others’ perceptions:Bearish (28.1)
November PreviewNovember Preview
Overall trend outlook:
Bearish (32.0)
Sellers’ perceptions: Bearish (33.4)
Buyers’ perceptions: Bearish (30.0)
Others’ perceptions:Bearish (29.6)
Overall trend outlook:
Bearish (28.3)
Sellers’ perceptions: Bearish (31.0)
Buyers’ perceptions: Bearish (28.5)
Others’ perceptions:Bearish (26.2)
November Preview
A look at how Scrap Trends Outlook Index numbers for August stacked up against actual changes in last month’s market.
Scrap Trends Outlook • October 21, 2015
The smallest losses on a percentage basis in the October market were among the foundry grades. They are expected to drop again in November, and this time they are expected to perform worse than other grades, the survey says. These grades are expected to be down in all regions, and significantly so across the board.
Shredded scrap is expected to be weak in November, following deep October decreases, according to respondents. Supplies are adequate to meet mill demand. However, Turkey has not re-entered the export market seeking frag, and this may contribute to a larger decline. Fully 77 percent of respondents say frag will fall next month.
Cut grades saw some big drops last month, but they were less severe than other scrap. Supplies were adequate but demand was down. Not much is expected to change in November. Both No. 1 and No. 2 heavy melting are expected to be down, as are the P&S grades, according to the survey, all hurt by a lack of exports.
After dropping last month by significant numbers, prime grades are expected to decline in November, according to the survey. Both No. 1 busheling and No. 1 dealer bundles are available right now. Combined with an expected drop in demand, this is all but certain to push prices down next month, respondents say.
November Preview
FOUNDRYGRADES
Sellers’ perceptions: Bearish (32.1)
Buyers’ perceptions: Bearish (29.4)
Others’ perceptions:Bearish (29.0)
Includes Shredded, Other Fragmented Materials.
Overall trend outlook:
Bearish (30.3)
October outlook:
Bearish (36.7)
October’s actual change:
Punchings: - $50/11%
Misc. Foundry: - $48/14%
Notable Quotes about Next Month (Selected comments from participants in this month’s market survey)
3
10 Things to Watch in November
Scrap Trends Outlook • October 21, 2015
• Prices fell more on purchases made deeper into October,
a potential sign of lower values heading into November
• Holiday slowdowns could further diminish mill output
• Inventories of available prime scrap could weaken
• Service center inventories are not good for orders
• Mill raw steel capacity rates continue to stagnate
• Export is expected to be weaker, especially from Turkey,
but also with a downward push from Asia
• Economic uncertainty in the United States continues
• Supply still slightly outweighs demand in most regions
• Various global crises could trigger problems overseas
• Anemic production follows steel orders as they hit a lull
Holiday month will reduce activity.
On the retail side those that make their living scrapping are working twice as hard and are the main supply now for shredders.
Scrap prices appear headed for another leg down as mill demand softens further in November. Destocking throughout the supply chain persists, leaving inventories.
November+cold+snow=Good.Imports-steel-coil-bar=Bad.
These prices are stupid low. We are at a point where our customers have to pay us to remove their scrap.
Mill scrap demand is lower and will only get worse. We won’t hit the bottom until we see signs of improvement in steel order books and production.
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BEARISH BULLISH BULLISH BULLISH
BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH
BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH
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Perceived Change in DemandPercentage of responses
Perception of Steel Mill Production Percentage of responses
Perception of Export DemandPercentage of responses
Perception of Service Center Demand Percentage of responses
Perception of Dealers’ Yard Inventory Percentage of responses
Perception of Total Mill Orders Percentage of responses
Perception of Local Scrap Supply Percentage of responses
Perceived Change in SupplyPercentage of responses
Perceived Change in PricesPercentage of responses
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BEARISH BEARISH
Index of November Market Factors
Perceived November Market Changes
(Scrap Trends Outlook Index indicating perceptions of market factors.
All perceptions are measured against Oct. levels/situations)
(Scrap Trends Outlook Index indicating perceived changes in
market direction. All perceptions are measured against Oct.)
Scrap Trends Outlook • October 21, 2015
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What are you hearing about the markets?
We’re looking for insiders just like you to participate in our monthly market survey.
To participate in next month’s online survey and receive a complimentary copy of Scrap Trends Outlook, email [email protected]
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BEARISH BULLISH BULLISH BULLISH
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Perceived Change in Mill Inventory: Percentage of responses
Perceived Change in Transportation: Percentage responses
Perceived Change in Home Scrap:Percentage of responses
Perceived Change in Alt. Irons Demand: Percentage of responses
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BEARISHBEARISH
Change in Historical Factors*: Percentage of responses
Perceived Change in Seasonal Factors: Percentage of responses
Index of November Market Factors (Scrap Trends Outlook Index indicating perceptions of market factors.
All perceptions are measured against Oct. levels/situations)
* Changes in price & tonnages for each October-to-November market period over the past ten years. Source: Scrap Price Bulletin
Scrap Trends Outlook • October 21, 2015
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6Scrap Trends Outlook • October 21, 2015
Northeast: Overall demand is expected to be lower here in November, which could force prices down. Beyond that, supply is volatile, which could prompt changes in the eventual drops.
South Atlantic: Expectations for price decreases are not as bad in this region as elsewhere in the country. However, supplies could be stable next month, with diminished demand.
Midwest: Weaker broker and mill demand are expected to drive market factors here, although respondents said they would not be surprised if exports remained somewhat flat. Acting as a possible wild card, supplies could be stable, or fall slightly.
South: Most factors are expected to be down in November, leading to an expectation that demand will decline. Respondents say the November market may not fall as far as October’s did.
West: If demand drops as far as expected, this region could become one of the weakest in the country next month.
Canada: The prices of most grades are expected to be down or a weak sideways at best next month, on lower demand.
Mexico: Prices are expected to be down next month as mills are looking to buy somewhat less scrap, and supplies are flat.
Regional Views Different factors in markets across North America
Methodology: For the above tables, a numerical value is given to the overall trends in each category for the upcoming month after all the survey results of a series of 15 indexes are calculated based on a weighted average and then broken down by region, consumer or seller. A number close to 50 will give a ‘sideways’ or ‘unchanged’ reading, while numbers above 50 will give a reading for a bullish trend. The closer to 100, the more likely it is that prices will trend upward. Conversely, a number below 50 will give a reading for a bearish trend. The closer to 0, the more likely it is that prices will trend downward. N/A means there were too few survey responses to publish a reliable figure, or that the category did not apply to the type of business being surveyed.
Outlook by Region (based on weighted averages of survey responses)
Northeast Midwest South Atlantic South West All Regions
Mill Factors 38.2 37.1 41.4 41.7 37.5 41.2*
Service Centers 35.0 25.0 30.0 25.0 30.0 30.0*
Exports 25.0 45.0 40.0 41.6 38.6 38.3*
Dealer Inventory 62.5 35.0 45.0 62.6 37.1 45.5*
Brokers 25.0 38.5 25.0 37.5 40.0 38.1*
Overall Market 41.6* 39.1* 42.5* 41.4* 38.0* 40.1*
*Weighted averages of all survey factors, including those not listed on this table
Outlook by Scrap Purchaser* (based on weighted averages of survey responses)
Consumer Demand Inventory Home Scrap Orders Production Overall Trend
Integrated Mills 25.0 50.0 75.0 00.0 00.0 30.0
Mini-Mills 37.5 50.0 50.0 35.0 35.0 41.5
Foundries 25.0 37.5 62.5 37.5 37.5 40.0
Export Yards 40.0 50.0 NA 25.0 NA 38.3
Brokers 37.5 50.0 NA 25.0 NA 37.5
Overall Market 33.0 47.5 62.5 24.5 24.2 37.5
* Weighted averages of the survey factors included only on this table
Outlook by Scrap Seller* (based on weighted averages of survey responses)
Seller Mill Demand Inventory Local Scrap Exports Mill Production Overall Trend
Generator 31.3 37.5 37.6 41.6 25.0 34.6
Processor 33.4 70.7 75.0 25.0 25.0 45.8
Dealer 38.9 44.5 52.8 41.7 25.0 40.6
Export Yards 40.0 50.0 50.0 25.0 25.0 38.0
Brokers 37.5 50.0 50.0 25.0 25.0 37.5
Overall Market 36.2 50.5 53.1 31.7 25.0 39.3
* Weighted averages of the survey factors included only on this table
Viewpoints on the Next 6 MonthsTop Issues Over Next 3 Months
Long-Range Outlook (Scrap Trends Outlook Index numbers for the next 2, 3 and 6 months)
7
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6-Month Trend: 70.8 (Bullish)
The next issue of Scrap Trends Outlook will appear Nov. 20 and look at perceived December trends.
We would like to thank all those in the industry who took the time to complete our “Scrap Trends Survey”. You will receive a request to be part of the survey no more than once every four weeks. We encourage you to participate so we can continue to offer this reporting.
Published monthly by American Metal Market225 Park Avenue South, 6th FloorNew York, NY 10003Global Publisher: Raju Daswani
© 2015 American Metal Market LLC. All rights reserved.
DisclaimerThis document is for information purposes only. The information contained in this document has been compiled from sources believed to be reliable. Information is collated through surveys with dealers, brokers, generators, processors, and users in the industry and represents a perception of where market factors are and where they may change. While every effort has been made to ensure that the information is correct and that the views are sound,
American Metal Market LLC cannot be made liable for any
loss no matter how it may arise.
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including those arising from the negligence of Scrap Trends
Outlook, its employees or representatives.
January Trend:60.9 (Bullish)
December Trend: 42.1 (Bearish)
Scrap Trends Outlook • October 21, 2015
Key Indicators Over 6 MonthsExport demand is expected to bounce back at least a little as 2016 moves ahead
Dealer yard inventories may stabilize
Historical figures predict mixed 2nd quarter
Election year politics are expected to affect decisions made on the U.S. economy
Springtime usually gets scrap flowing again, perhaps leading to a looser supply
Key Indicators for JanuaryMill inventory levels may decline mid-winter
January frequently sees pricing increases
Export demand is expected to remain cold for at least the next one to two months
Service center demand is expected to drop significantly throughout the next 30-90 days
Local scrap inventories may decline severely as little scrap is moving into the pipeline
Key Indicators for DecemberCapacity rates are in a holding pattern right now, and are not expected to improve soon
Mill production will fall off at year’s end
Mill orders are expected to decrease
Alternative irons demand is expected to drop slightly over the next few weeks
Winter weather is likely to impede the flow of scrap into sellers’ yards, reducing supply
Soft overseas demand.
If they (prices) are not higher, there will be no scrap dealers left.
Wishful thinking that by mid-2016 the steel industry (will have) seen an improvement in orders and production rates.
November will likely represent the bottom for ferrous scrap prices as they’ve adjusted to more historical levels relative to oil, ore and steel. Q1 steel demand, while not robust, will be supported by more domestic production as trade restrictions temper imports.
• Many expect a long-term increase in scrap prices, in a return to levels from 2015’s springtime numbers
• Some economic indicators could be slowing down
• Fears over Asian markets could drive demand back down, limiting domestic and foreign buys
• Despite some positive signs a few months ago, mills are not as busy as hoped for late in 2015
• Historically, prices move up at the start of a new year, and that is expected to continue in 2016
• Weather will begin to play a role in northern regions over the next 30-90 days, perhaps hurting supply
• Export is expected to remain weaker into late fall and early winter and may not recover for some time
