Archive for Steel

Reported drop on heavy metal steel scrap price in China

Eastern China steel mills have cut ferrous scrap prices.

Source is Singapore (Platts)–27 Aug 2015

Jiangsu Shagang Group, the largest scrap user of China, on Thursday cut its buying price by Yuan 40/mt ($6/mt) in view of a recent drop in rebar prices, a company source said.

After the adjustment, Shagang will pay Yuan 1,330/mt ($208/mt), including 17% value added tax, delivered to Zhangjiagang, Jiangsu province, for heavy melting scrap 6 mm and above.

“With the bearish outlook on domestic steel markets, I think scrap prices are likely to repeat the previous low levels,” said a source from a mill in the region, adding that small induction furnace mills had successively cut their buying prices earlier when rebar prices began to fall.

All of this sends a lower traffic signal for railroad traffic.

Most analysts have failed to predict this rapid a fall in scrap prices that two years ago were in the $360 to $400 approximate range per metric tonne.

How To Get The Best Scrap Metal Prices // Tips from Scrap Metal Junkie

There is a great deal of price variance when you abandon rail track and want to determine the salvage value as relay materials and / or as scrap materials.

This on line report gives you an idea of that market price volatility.

By playing the market, a seller of rail scrap can get a considerably higher price then just the base line estimate.  Here are some valuable economic lessons from published sources.

What Determines Scrap Metal Prices?

Scrap Metal Prices are a function of multiple market factors. These include, metal type, location, quantity of scrap metal, and the current market sometimes daily changing value for your materials.  In other words, the price you get paid by a scrap yard will depend on precisely what materials you are selling, where you are selling (what side of town, which side of the world, etc), how much scrap metal you are selling (pounds vs tons versus hundreds of tons), and how much the material is worth in the daily changing market at the “spot price”.

Scrap Metal Type:

Scrap metal is broken down into many different types of categories. For example, Copper, Lead, and Stainless Steel are all types of scrap metals that can be sold at a scrap yard, and each of these metals can get further subcategorized into copper wire, lead wheel weighs, or 18-10 grade stainless steel, for example. What is often not obvious to a railroader is that prices are volatile.

Also, a grade can be judged differently by different buyer at the same time. For example, what one scrap yard considers as bare bright scrap copper, or Rail #1 will at another competing scrap yard be considered as copper #1 or Rail #2. Keep this in mind when shopping around for better prices, because the last thing you the seller want is a quote for your materials that might be as much as ~40% reduction in price versus another competing buyer says the scrap metal junker.

Geographical location:

Without making too many generalizations, sellers can assume that scrap metal prices will always be highest in areas where there is the most competition. This means rural areas, areas far away from refineries, areas too far inland, etc will rarely have better pricing then those places where scrap yards can both fight for customers and haggle with refineries or steel plants. Keep this in mind when searching for the best scrap yard.

“Spending 1 more hour round trip and an extra $15 in gas to get to a further scrap yard may make you an additional 15% at the pay out window!”

In a similar competitive action, some sellers are actively selling their scrap metal on eBay!

Quantity of Scrap Metal:

On the surface, it is a simple concept; the more metal volume you have, the more it is worth. But further exploration shows that volume packaging is a tool which can be used to your advantage.

Current Spot Metal Prices:

These would be the prices that newly refined ore and scrap is being sold for. In some markets, steel scrap competes with billets. In general, the more money a steel mill can refine the scrap at because of higher finished steel prices, the more market leverage you the seller have at selling your scrap. This will not always be the case, but it could be. This means that the process to use often is estimating your scrap on hand value is to follow the pattern of changing spot price.

How To Negotiate the Best Scrap Metal Prices?

The easiest way to improve the market value of your scrap metal will be to somehow manipulate any of the 4 different parameters that scrap metal prices depend on to your advantage. Here are three simple techniques to getting better pricing, ordered from easiest to hardest; You will need to use all three to get the absolute best pricing!

Play the quantity: Every scrapper has encountered this scenario: You call up the scrap yard to check on the price of a certain type of metal; their first and only question “How much do you have?” When you buy/sell in bulk, you get better pricing, and the scrap yard is no exception. Try this on for size: instead of selling brass by the bucketful, try the barrel-full! Save up a 55 gallon barrel of brass (it doesn’t need to be full). A semi-full barrel of brass should weigh 1/4 ton – 3/4 ton depending on what type of brass components are in it. Same process works for steel rail scrap materials.

When you call up the scrap yard to ask what they pay for brass, they will be much more receptive to your price requests if they know you will be bringing in a 1/2 ton of brass, and hopefully will be happy to offer you 10% more than what they normally would!  This mentality can be applied to all metals.

Save up your shred metal and sell it by the trailer-full, or even dumpster-full! Or the train load.

Play the market: All things being equal, scrap metal prices will drop slightly in the summer and increase slightly in the winter. This is especially true in areas that have very cold winters that impede recyclers and scrappers from collecting and salvaging. Use this to your advantage! WARNING: this only works in scrap markets where there is not much volatility, meaning the price is not constantly jumping and falling without reason.

Play the scrap yards: Every scrap yard is willing to compete for your business, especially if your business is consistent! (Especially if you are scrapping full time!) It all dependents on how much material you are bringing in, and how consistently you are bringing it in. Start off by becoming a steady customer at a scrap yard that has proven itself to be of a high-caliber. This is the key! The better the scrap yard, the better they treat their customers.

Be sure to introduce yourself to the owner, and always save your scrap yard price tickets! ALL OF THEM! Total up how much metal you bring in per week, per month, per year, etc, and how much material that is for them. Use that as business intelligence to guide your price negotiations.

One way to be aggressive in getting the best price offer is to understand that sellers that bring their business to the scrap yard precut to scrap class measurements can receive a better price.

// If you have any questions about getting better scrap metal prices, or if your scrap metal prices are “fair,” there are experts you can turn to or you can register for a metal recycling forum.

Read more at: > http://www.scrapmetaljunkie.com/993/best-scrap-metal-prices

There are other examples of pricing rail scrap. Interested readers can review more about price of old rail materials by reviewing ICC abandonment cases, rail line subsidy negotiation hearings at the ICC or the STB, or by viewing net liquidation estimates occasionally published by Woodside Consulting or R L Banks as railroad experts.

You can also scan my rail blog to see examples of the trends in the street prices of scrap steel. Scrap steel that might have earned between $350 and $450 a ton in the past four years is now in the price range of $220 to $270.  Hanging onto scrap for a long term price rise in this case could have cost a seller as much as ~ 42% to ~51%.

Examples of how quickly prices like scrap steel can change in a rail project like an abandonment or a subsidized line service asset valuation

It is important to consider market realities when undertaking net liquidation or rail track materials and other rail project economic assessments under ICC/STB regulatory procedures for railways.

Market prices can swing dramatically.  15% range within a week’s time as shown in one exhibit and extreme ranges of 70% monthly.  These are not theories.  These are actual market force occurrences.

The two attached exhibits identify price of materials and scrap changes over two different time periods using two different data sources.  The URL for the sources are noted if you  care to check for more information.

Collecting railroad materials and holding onto them for long term value change and higher price sales can be risky.  Timing of sales for scrap or for possible but limited relay use is an art form.  It may require hedging.

Steel scrap collected in the period after the global recession of 2007-09 and held for higher prices is now in mid year 2015 worth a lot less per ton (or metric ton).

These prices swings are important to railway asset managers from the US to South Africa. — and from Brazil to Mongolia.  The market for scrap rail is global and highly influenced by the risks and opportunities today in the China steel market.

Scrap rails and rail materials along with all forms of scrap steel are also seeing price competition from the sale of unused steel billets that are worth more than the miscellaneous scrap.  When the price ranges are close, the demand for scrap declines.

 

Examples of price volatility in real steel markets j Blaze

Market Timing & Price Volatility of Scrap against

Markets guessing as steel prices keep changing — trend is down.

From Platts report.. By Tom Balcerek | July 15, 2015

Market conditions changing as the supply/ demand real world relationship change.

Good Economics 101 lesson

Sent from my iPad

Long term trend clearly has been falling prices. Sheet steel suppliers in the U.S. are struggling in the face of a 30% price drop from a year ago.

The bellwether sheet product, hot-rolled coil, is selling for about $465 a short ton ex-mill. Yes, that price in mid July was up about $25/short ton from two months ago.

But that contrast with transaction prices around $660/st a year ago.

US sheet mills have filed unfair trade cases against coated sheet imports and many believe dumping and/or subsidy cases against cold-rolled coil imports will soon follow.

With steel prices falling, so too will rail traffic.  Both raw materials like iron ore and scrap.  As well as finished rolled and flat steel product movements.

South Africa steel industry critical financial condition in collapsing global market

South Africa

With commercial assertions of possible steel finished product dumping, (as Chinese steel production at home exceeds the domestic market demand by customers), another South African steel company faces a financial crisis.

Too many assets on the Balance Sheet.

Too many employees given the business decline these past two years.

South Africa’s 2nd largest steelmaker Evraz Highveld Steel and Vanadium confirmed that it had temporarily ceased steel production at its steelworks. The company cited “working capital constraints and reduced domestic demand…” It also cited a “significant” increase in steel imports from China.

From raw resources like iron ore and met coal to scrap metal to charge steel furnaces, the global picture of the FOREST is that we can see a lot if the TREES “burning”.

LOCAL JOB IMPACT

Evraz Highveld Steel and Vanadium has issued a proposed restructuring notice in terms of South African laws Section that could see the country’s second-largest steelmaker potentially cutting half of its workforce.

RESPONSE

The local labor organization are demanding discussion to how to fix the global market locally. Their leadership appears to be in self denial. Transnet’s grand 7 year market development plan now approaching year four of execution also appears to be unadjusted to these global market shifts and local South African customer changing logistics service demand of the rail and ports future services.

Sooner or later, Transnet will have to adjust. If not, it may over invest in unproductive added assets. What do you think?

For more news coverage, I encourage you to log onto the following links http://www.engineeringnews.co.za/article/evraz-highveld-moves-to-cut-half-its-workforce-2015-07-21/rep_id:3182 And http://www.engineeringnews.co.za/article/cash-hungry-steelmaker-evraz-highveld-halts-operations-2015-07-20

Anglo may cut one third of its jobs as steel industry market demand drops prices

What has taken senior iron ore – steel industry leadership so long to adjust their strategic plans? What are rail and port companies that provide logistics services to Anglo doing to resize their transport service assets?

From Reuters sources http://www.iol.co.za/business/companies/anglo-to-shed-50-000-jobs-1.1890299#.VbJDREr3arV

Headline reads: Anglo to shed 50 000 jobs (over the long term) July 24 2015

Reporter is Silvia Antonioli

Anglo American, the fifth-biggest diversified global mining group by stock market capitalization, announced on Friday that it will move towards the elimination of as much as one-third of its work force. This appears to be a belated recognition of the strategic lower market steel demands and the consequences on iron ore prices in the face of an over supply of resources like iron ore.

It also admits it “might put up more assets for sale”…

It’s Board appears to finally reacting after the accelerating slump in metals prices that seen its stock shares decline to a 13-year low.”

MIGHT GET WORSE

The company posted a steep fall in first-half profit after a rout in prices of metals from platinum to iron ore. The company said “the next six months could be even worse.” “Quite frankly we didn’t expect the commodity price rout to be so dramatic… … CEO Mark Cutifani said during a presentation to market analysts. In the short term, management says it “would cut about 6 000 of its almost 13 000 office-based and other non-production job roles globally”…

If market conditions soured further the company would consider putting up for sale more of its underperforming assets than currently planned, Cutifani said.

Anglo employs 151,000 staff worldwide. I

N ITS PR NEWS RELEASES the company puts a best “spin” on the current financial results as it is about half way through its three year strategic change previously announced to investors. The economic interpretation from the analysts meeting is that they are going to have to move much faster in making changes and/or make bigger changes

REPORTED RESULTS:

Anglo American Interim Results for 2015 include the following cited on the Internet. “Improved operational performance and accelerated cost and capex reductions to mitigate price weakness” says the company in its financial reporting. Group underlying EBIT of $1.9 billion, a 36% decrease due to sharply weaker commodity prices ($1.9 billion underlying EBIT impact), Partially offset by weaker producer country currencies and cost reductions ($0.6 billion underlying EBIT benefit), Commodity price-driven impairments of $3.5 billion after tax, including $2.9 billion at Minas-Rio

FUTURE LOOKING PROJECTIONS include: $1.5 billion of operating and indirect cost reductions and productivity gains targeted in H2 2015 and 2016 (operating costs $800 million, productivity gains $400 million, indirect costs $300 million) Additional company capital expenditure reductions of up to $1.0 billion by end 2016 $1.6 billion of “disposal proceeds” delivered in July 2015

Another bad sign for the South African steel industry and future rail related traffic as AMSA reports

The South African Steel Industry is hit hard by he global slowdown in the market DEMAND for steel.

Reports today from multiple sources say for example that South Africa’s largest steel producer ArcelorMittal South Africa (AMSA) is giving notice that it is weighing the partial or full closure of its Vereeniging Works, in southern Gauteng. The Vereeniging mill is perhaps South Africa’s oldest steel plant — going back to 1911 as the Union Steel Corporation of South Africa.

Some market sources suggest that ArcelorMittal may soon make a trading statement indicating that the company might report a large loss per share in the half year to June 30. One source, Mining Weekly, has its reporters suggesting that it could be as much as “1,400% worse than the 2c/share loss incurred during the corresponding period last year.” Other South African steel companies like Highveld Steel and Vanadium are also reporting depressed commercial results.

This marks a continuing pattern of global declining prospects for ore, met coal, and scrap plus lower future business revenues for the railroads and ports that handle the steel related inputs and outputs.

Are the transporters changing their strategic plans or hoping their customers’ business patterns will suddenly change?

Go here for more reported details: http://m.miningweekly.com/article/poor-citizen-amsa-promises-to-mend-ways-as-it-seeks-support-to-save-vereeniging-and-company-2015-07-23

Economic Assessment of a city with these great attributes. Is All Well?

Here is a US city with the following favorable economic attributes.

It has ample water access. It has an international airport. It is served by three competing railroads. It has direct local access to three of the highest traffic density US Interstate Highway routes. Sounds like the basis of a solid urban economic development, correct?

You would be wrong.

This is Gary Indiana. A sort of mini Detroit says The Economist.

Gary’s unemployment rate is unofficially close to 30%

28% of the population lives below the poverty line.

50 some years ago, this city was home to 180,000 people and most were employed and earning good wages. 30,000 were employed at the U.S. steel mega steel mill after WW-2. Today, only about 5,000 work there. And the population is down to < 79,000.

With about one quarter of its building boarded up.

In 1970, about 50% of the residence aged 16 and over worked in manufacturing jobs. Today, only about 14%.

As a Conrail strategic planner with Chicago roots, I watched the change of the southern Lake Michigan heavy industrial regional landscape between the South Chicago steel complex and the Gary Works.  The entire region was caught up in the global steel making changes with cheaper competition from abroad. Gary was not alone.

Investors were losing faith in the old steel business model.  Political elected leaders missed the economic signs.  After all, many like Gary’s past leaders could say they had all the infrastructure qualities — some even an international airport!!

RESURRECTION?

Gary is trying to reinvent itself. Maybe as a logistics semi processing and distribution center.

It is clear that despite its apparent advantageous characteristics in the introduction above, fancy economic indicators like “access” don’t by themselves make the future. Hard work and excellent choices are needed in order to reinvent a healthy city economy.

A manufacturing giant through and after WW-2, approximately 30% of the US workforce was in manufacturing. Today, maybe ten percent.

Lots of cities from Detroit to Gary failed to catch the changing economic trends after the late 1970’s an adapt. Some did, like South Bend and Galena.

The critical success factor is to know how to make change and execute.  To walk away from a historical core local employer like US Steel was in Gary is hard.  Too often the easy road of hanging on is the political choice.  City planning skills to make such strategic changes are often lacking.  It is a tough call,

Check The Economist 11 July issue for details of the stories as cities try to remake themselves rather than manage their decline.

Commodity Global Surpluses Persists — means weak demand for rail services

A Bloomberg report on Jul 8, 2015

The analysis of the demand for port and rail freight always begins with an examination of the market supply/demand at the buyers level. China and India are the major demand markets. But the long term surplus of supply means tough times ahead for suppliers in the emerging nations.

According to a Bloomberg report, the world is still mired in a surplus of most commodities, which means tough years ahead for prices and shipments of added materials. The actual source is from analysts at Goldman Sachs Group Inc. led by Jeff Currie.

“Long-term surpluses in most commodity markets require prices to remain lower for longer,” the Currie team wrote. The markets are contending with declining costs, a strengthening dollar and slowing growth in emerging economies like China that use a lot of raw materials, the bank said.

Patrick Pouyanne, the chief executive officer at French oil giant Total SA, told a parliamentary commission in Paris that the oversupply of oil will last into 2016. A sustained long term recovery this year isn’t likely, Societe Generale said in a report today.

Despite the long term slide in prices and the lowered market demand, most emerging nations have still not adjusted their strategic plans for rail,and port growth. Their current tactics seem to be “damn the torpedoes, and full speed ahead”. That kind of thinking over the past decade resulted in Greece’s economic headache.

Who will step up and change investment strategy first? Who is going to be that leader?

To read the entire article, go to http://bloom.bg/1Hbu7HR Sent from my iPad

Bloomberg reports negative China steel growth.

From Bloomberg, Jun 18, 2015

“Chinese steelmakers are deepening the first production cuts in a quarter century”…

As manufacturing steel production drops, there are economic signs to look for.

Possible “dumping” of finished steel.

Stockpiling of Chinese imported iron ore and coke.

More investor uncertainty about emerging nation blueprints for new mines, ports, and railways.

To read the entire Bloomberg news report, go to http://bloom.bg/1GTU0PI

Crude steel output will shrink as much as 2 percent this year, according to the China Iron & Steel Association. That is the first contraction since at least 1990.

A recent up tick in raw material costs for steel and a collapse in steel prices has pushed the Bloomberg Intelligence China Steel Profitability Index to the lowest in almost seven years.

To understand more about the prospects for adding more to the supply side of global trade, we need to know even more about the market demand side.  As China’s growth slows…    …so too will the need for more and more imported resources from greenfield projects.

So which greenfield projects will still be needed?