A murky market.Domestic ferrous ferrous (fĕr`əs), iron in the +2 valence state.
Containing or having to do with iron. The difference between ferrous and ferric is the number of valence electrons they contain (ferrous contains two and ferric contains three), which scrap markets continue to see prices not seen in years. Bankruptcy filings continue to filter through the domestic steel industry, with more than 20 filed over the past three years. A number of these struggling steel companies, most notably LTV LTV
See: Loan-to-value ratio Steel Corp., Cleveland, have closed down.
This downward trend doesn't appear to be abating any time soon. While the federal government is looking to put some tariffs in place to restrain the "dumping" of steel from outside North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , movement of ferrous scrap is inching along.
It is not an environment that holds great opportunities for many scrap processors. The offshore market, on the other hand, holds some allure for companies that have access to important waterways The list of waterways is a link page for any river, canal, estuary or firth.
At the same time, the slumping global economy has resulted in sharply reduced freight rates. While lower costs to ship material had been a big advantage for some exporters, the cost to ship material is starting to climb, cutting into a profitable condition for shippers.
While some export markets hold promise in the short term, many of these sectors remain susceptible to the difficult market conditions being seen in the U.S. An overall slide in the world economy has been taking a major bite out Verb 1. bite out - utter; "She bit out a curse"
let loose, let out, utter, emit - express audibly; utter sounds (not necessarily words); "She let out a big heavy sigh"; "He uttered strange sounds that nobody could understand" of the scrap industry in general. However, the outlook for 2002 could be better, although the optimism is far from unanimous. Some vendors say that their naturally optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op outlook stems from the law of averages that next year will be better than the last two, but this is despite the lack of any substantial, concrete signals that things are getting better.
The difficulties being seen now will ease back as the steel industry starts to strengthen. One large ferrous scrap processor says that he is hearing that activity has picked up on the East Coast. This move, along with the decline in imports of scrap from Europe into the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. should create a better balance for the ferrous scrap market in the U.S.
While next year holds some promise, 2001 was a year that scrap processors staggered through. According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. recent figures from the U.S. Department of Commerce, exports of No. 1 heavy melting scrap dropped by close to 80 percent in September 2001 from figures for the same month in 2000. The sharp drop, some speculate, was the nadir of the economic cycle.
The drop for September added to the overall woes felt through the year. According to the U.S. Commerce Department, total shipments for the first nine months of 2001 are down close to 5 percent from figures the same time the previous year.
While export markets struggled during the first half of the year, there has been anecdotal evidence anecdotal evidence,
n information obtained from personal accounts, examples, and observations. Usually not considered scientifically valid but may indicate areas for further investigation and research. that some nascent improvements in scrap shipments are starting. South Korea, the largest consumer of U.S. ferrous scrap, is starting to place larger orders. And China, which backed out of the market during the second half of 2001, seems to be moving back into the market. This, one exporter notes, is part of a trend by Chinese mills to develop a much better rapport with processors.
A SHORT TERM POP
There has been some speculation that early in 2002 there could be an increase in exports. One large export shipper SHIPPER. One who ships or puts goods on board of a vessel, to be carried to another place during her voyage. In general, the shipper is bound to pay for the hire of the vessel, or the freight of the goods. 1 Bouv. Inst. n. 1030. said that there is optimism creeping into the market. This, he said, "should give the (export) market a short term pop."
However, this improvement may be short lived. The East Coast exporter speculates that any strength in the export market would be limited by the possibility of increased ferrous shipments picking up from Black Sea ports in the former CIS countries There are two lists concerning CIS countries:
Crude iron obtained directly from the blast furnace and cast in molds (see cast iron). The crude ingots, called pigs, are then remelted along with scrap and alloying elements and recast into molds to produce and direct reduced iron Direct reduced iron is produced from iron ore powder through heating and chemical reduction by natural gas.
While this is in general a more expensive process than reducing the ore in a blast furnace, there are several factors which can make it economical:
While the exporter feels total shipments out of the U.S. in 2002 will be greater than 2001, in all likelihood export totals will essentially be flat for 2002.
A wild card in the overall mix continues to be China. Imports to this country shot up around 100 percent last year, one exporter notes. While imports are likely to be strong again in 2002, most feel that China will not post such a strong jump in total imports from the U.S.
The continued strength in demand for ferrous scrap into China, however, will continue as the country looks to modernize its steel industry, replacing many of the open-hearth furnaces for electric arc furnaces An electric arc furnace (EAF) is a furnace that heats charged material by means of an electric arc.
Arc furnaces range in size from small units of approximately one ton capacity (used in foundries for producing cast iron products) up to about 400 ton units used for secondary (EAFs).
The trend will benefit the U.S. to a degree, although, one exporter notes, it is likely that the U.S. portion of this share will decline as other regions of the world fight to ship more material to China.
Robert Philip, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Schnitzer Steel Industries Inc., Portland, Ore., says that while EAF EAF - Effort Adjustment Factor mini-mills in Asia continue to grow, demand for scrap from the U.S. and Europe will continue to increase.
While the U.S. will be a beneficiary of this steady demand, Philip also sees competition increasing from countries in the former Soviet Union.
One factor for the increased shipment of ferrous scrap from CIS countries to Asia is that the quality of the material from this region is fairly good, Philip says.
Another reason is that the price of scrap landed in Asia is essentially the same from Europe as it is in the U.S., preventing any price advantage from either region.
Detlef Mueller, president of U.S. Ferrous Trading Inc., Greenwich, Conn., says that in much of 2001, Black Sea port activity was dead, although it is starting to come back.
Mueller would not forecast any outlook for 2002, citing an avalanche of various industry-related and non-industry issues that all go into the market for ferrous scrap, including such issues as exchange rates, freight rates and the monetary policies of various countries.
Schnitzer's Philip sees volatility in the export market for 2002 unless there are significant changes in some external factors, including the specter of terrorism that has curbed some movements.
While other exporters see the Asian market, with the exception of China, as muted for 2002, Philip sees some of the more mature Asian countries becoming growth areas for exporters who are committed to the offshore market. At the same time, while the reputation of China has been of a buyer that jumps in and out of the market, depending on the price of scrap, Philip sees China as becoming more of a steady buyer. Chinese mill buyers are looking for Looking for
In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. longer-term relationships, he notes. They want commitments, abiding by contracts, with consistent, loyal, quality shippers.
"They have become more sophisticated. They are beginning to be the types of buyers who are in it for the long term," says Philip.
MEXICO IN A HOLDING PATTERN
The Mexican market at one time looked like one of the growing avenues for U.S. ferrous scrap exports. However, Mexican steel producers are being hit harder than U.S. producers in the current shakeout. "What I am hearing is that there won't be any significant buying any time next year (2002). The dollar is too high for Mexican mills to buy U.S. scrap," says one recycler.
Jack Vexler, president of Monterey Iron & Metal, San Antonio San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. , says the Mexican market "is all but dead." He notes that the Mexican steel industry, in fact, is in worse shape than the U.S. He ticks off a litany litany (lĭt`ənē) [Gr.,=prayer], solemn prayer characterized by varying petitions with set responses. The term is mainly used for Christian forms. Litanies were developed in Christendom for use in processions. of problems affecting the Mexican industry, including the strength of the dollar compared to the Mexican peso, which is making scrap purchases more difficult.
The author is senior editor of Recycling Today and can be contacted via e-mail at dsandoval@RecyclingToday.com.