Optimism and speculation surround the August market

According to RMU’s monthly sentiment survey, most dealers are optimistic about an increased demand for both scrap and steel. The economic indicators are essentially positive, especially for GDP in Q3. We’ll have to check on the PMI later this week and keep you updated.

The survey responses about the balance of supply and demand for scrap showed that most people think the market is not in equilibrium. This was different from other RMU surveys in which an even split of respondents thought the market was in balance.

Most survey respondents said was there too much supply for too little demand. With all the hype about whether there will be enough scrap going forward, we have to wonder whether our steel industry can support their supply base of scrap generation. Maybe the new capacity will absorb all this scrap. But they have to be able to sell their steel.

The export market has quieted down for bulk cargoes for Turkey, as there has been no ability to purchase from North America at prices less than their last buy in. However, there has been increased pricing on containerized shredded scrap going to destinations other than Turkey.

The recent offers for pig iron have increased by $10/mt-$15/mt to $480/mt CFR for September/October shipment. U.S. mills have not booked at these numbers as the gap between pig iron and prime scrap has not closed. At the new offer price, pig iron will deliver to mills upriver at approximately $540/gt while busheling will be around $410/gt. This is a tough gap to bridge.

With this being an election year, the different policies proposed by the candidates could have a big impact on the markets. It will be interesting to see how things shape up in August and what that means for the rest of the year.