Following a year like no other in 2020 and the massive impacts of the COVID pandemic, US scrap market conditions improved significantly in December and January.
A number of factors contributed to the strong start to the year for stainless steel and scrap markets, including consumer restocking, rising nickel prices and surging carbon steel markets. Fastmarkets reports that its hot-rolled coil price index reached a 60-year high in mid-January. Ferrous scrap prices followed suit, rising by more than US$ 100 per gross ton in some markets in January, which in turn provided support to stainless and other scrap metal markets.
At the same time, healthier demand from the US manufacturing sector has been supportive. Total US steel mill shipments rose to more than 7 million tons in December - up 4% from November, according to the American Iron and Steel Institute. However, US steel shipments overall were still down nearly 16% in 2020.
The volatility in US steel output and commodity prices was reflected in major economic and manufacturing reports. The Bureau of Economic Analysis notes that US real GDP plunged 31.4% in the second quarter of 2020, followed by a record 33.4% increase in the third quarter. The months-long shutdown in 2020 resulted in shortages of manufactured goods and raw materials, leading to considerable pent-up demand and rising prices; global and regional supply chains are still feeling the impacts.
The outlook for the first quarter of 2021 is largely positive, even though major challenges persist for North American recyclers. Major stainless steel producer Outokumpu expects its stainless steel deliveries to increase by 10-20% when compared to the final quarter of 2020. But the rebound in manufacturing and commodity prices has started to show signs of slowing recently. As a result, US scrap recyclers continue to face unpredictable markets and a range of obstacles, including extremely challenging labour and transportation markets, while potentially higher regulatory costs and trade restrictions are also of concern. Given these challenges and the ongoing business uncertainty, market analysts are indicating further US industry consolidation could be in the works.
