Q3 / 2011
 
> WAXMAN INDUSTRIAL
> SCRAP CARES
 
  Scrap pricing resiliency continues through first half of 2011
  by Doug Malcolm
 
Scrap pricing during the first half of 2011 has proven remarkably stable in the face of very strong economic headwinds. After the run up in pricing at the end of 2010, the scrap industry was bracing itself for increased volatility during the early part of this year. This may have been an over reaction to the lingering memory of the very unstable 2008-2009 market. However prices have traded in a considerably narrow band as we have progressed through the current year. World economic fragility seems to have had little impact on North American ferrous scrap demand and its resultant pricing.

We continue to see healthy scrap demand from developing economies and consequent strong export tonnage. This is a trend which should continue, as steel production increases using electric furnaces will further exacerbate ferrous scrap supplies in the coming years. The largest increases in global EF production will be in China, India, Russia, and Turkey. These countries traditionally have not been strong recyclers and have always relied on offshore imports for the bulk of their scrap supply. This steady pace of ferrous scrap exports may leave North American mills scrambling for material in the third quarter compounded by seasonal industry shutdowns, particularly in the automotive sector.

North American automotive scrap production has certainly been reduced as a result of the Japanese earthquake and tsunami. We expect more normal production levels to return in Q4/11. However until this time, the supply will continue to be restricted and upward pressure on scrap pricing to the consumers will be the result.

North American steel pricing continues to remain at profitable levels, although we have seen slight erosion during Q2/11. This slight decrease is most likely due to increased capacity, and lower automotive demand. We continue to be concerned with the U.S. economic situation. Unprecedented government and personal debt levels are unsustainable. At some point in time, this issue will have to be addressed which will result in decreased economic activity. This effect will certainly reverberate across North America.

In Ontario, prime ferrous scrap will continue to be restricted due to slower automotive production and the strong Canadian dollar's negative effect on exports. Local seasonal demolition activity has been strong, resulting in a good supply of obsolete scrap.

We feel that scrap pricing levels in Canada should remain strong through Q3/11. The supply of scrap should remain restricted due to strong export activity and a less than vibrant manufacturing output. Steel making continues to perform at a high level of capacity in the near term. Average ferrous scrap prices for the year 2011 are on track to be one of the highest ever, pending an unlikely severe decline in Q3/11 and Q4/11.
 
 
  % change during previous quarter (first month to last month), Hamilton, Ontario consumer buying prices.
  SCRAP METAL COMMODITY TRENDS
 
No.1
BUSHELLING
-5.56%
 
No.1
CUT STRUCTURAL PLATE 5’ MAX
-13.20%
 
No.1
HEAVY MELT
-14.39%
 
No.1
BUNDLES
-6.49%
  % change during previous quarter (first day of month to last day of month), LME 3 month sellers price.
  NON-FERROUS COMMODITY TRENDS
 
ALUMINUM
-4.08%
 
COPPER
+0.67%
 
NICKEL
-9.57%
 
ZINC
+0.62%
 
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