Ferrous – Steel production in the United States is up 5 percent so far this year according to estimates from the American Iron and Steel Institute.
AISI estimates that for the year-to-date through July 20th, U.S. raw steel production rose to 54.2 million net tons, up from 51.6 million net tons during the corresponding period last year, while the capacity utilization rate increased to 81.1 percent.
While U.S. steel production has been on the rise this year, U.S. imports of total and finished steel products during the first half of 2019 were down nearly 13% and 17%, respectively, as compared to the first half of 2018. U.S. imports of hot rolled sheet are down 27% by volume so far this year, along with diminished imports of hot rolled bars (-31%), standard pipe (-30%), cold rolled sheet (-25%), and plates in coils (-21%). By country, finished steel imports from South Korea are down nearly 17% so far this year and imports from Brazil (-24%), Vietnam (-16%), and China (-9%) are all down significantly, not surprising given the current trade policy landscape.
With the U.S. economy still expanding, domestic steel production up, and steel imports down, one might expect that U.S. steel and ferrous scrap prices would be on the rise as well, but that was not the case in the first half of the year, at least. Fastmarkets AMM’s U.S. hot rolled coil index was down to around $514 per short ton, fob U.S. mill, as of late June. For comparison’s sake, that index was trading as high as $917 per short ton in June 2018. However, the major U.S. steel mills have been pushing for rate hikes over the last several weeks, pushing the HRC index closer to $600 per ton as of late July, according to AMM. Ferrous scrap prices have been faring worse than steel prices so far this year. Heading into July, producer prices for heavy melt scrap declined in 6 out of the preceding 7 months according to figures from the BLS.
Nonferrous – Most actively traded COMEX copper futures opened last week at $2.753 per pound but were down to $2.685/lb. by the end of the week. LME 3-mo. copper prices were on a similar trajectory, trending lower over the course of the week to close at $5,966 per metric ton on Friday. So far this year, the LME official 3-mo. copper price has ranged from as high as $6,533/mt in April to as low as $5,785/mt in early June.
The trend in domestic copper scrap price has been somewhat less than overwhelming this year, too. According to Fastmarkets AMM, the spread for No. 2 copper delivered to refineries has widened from around 32 cents per pound at the beginning of the year, to around 41 cents per pound recently. The chart below shows the trend in Refiners No. 2 copper going all the way back to 1988, the year I graduated from high school and “Faith” by George Michael was at the top of the Billboard charts.
Over the period 1988-2003, No. 2 copper scrap largely traded in a band around 50-100 cents per pound. But in the aftermath of the Great Recession, when Chinese stimulus was in full swing, No. 2 copper soared to around 400 cents per pound in 2011, well above the pre-recession peaks. As copper scrap prices and demand continue to shift -- AMM was recently listing refiners No. 2 copper at around $2.28/lb., scrap processors continue to develop new markets and add value amid rising quality demands at home and abroad. Here are the biggest shifts in overseas demand for No. 2 copper scrap so far this year.
Of note, our friends at the International Copper Study Group reported last week that global secondary refined copper production (from scrap) during Jan-Apr 2019 was up slightly (+0.5%) over the corresponding period last year to 1.362 million metric tons.
Paper and Plastic – The power of brand marketing is sometimes strangely overlooked as alternative materials are becoming more sought after in packaging. Bloomberg recently reported on a new startup using sawdust as an alternative for crude oil and natural gas in making plastics. The notion of sustainable alternatives only works if the marginal cost difference is negligible or overcome by other factors. This isn’t the case for plastics right now as drilling and fracking is expected to continue for the foreseeable future.
One concern is that alternative material efforts need to focus on finding solutions that can scale up to handle a growing problem in solid waste management. At Western Michigan University’s Fiber Recycling Course last week, Sustana Fiber introduced some of their food grade products being made from 100% post-consumer recycled fibers. However, there was some confusion as to how much of the testing of polycoated bleached fibers was from post-industrial as opposed to post-consumer sources. A key takeaway is that there is increased public interest in seeking out solutions. Brands are positioning themselves to capitalize on this, but recyclers need to be at the table if new solutions are to be viable.