Scrap showdown: Will ferrous export prices hold amid domestic market slump?

As the scrap market for June settles at lowered levels, let’s look at the situation for exports of ferrous scrap from the USEC and USGC.

Despite declines in the North American ferrous markets over the last two months, export prices have remained range-bound within a tight trading window. After a brief decline last week into the high $370’s, the price for Turkish cargoes jumped back into the $380’s for both U.S. and European origins. Will export prices from North America remain at these levels even after the Canadian and U.S. domestic markets have faltered?

RMU reached out to a prominent exporter who is very familiar with the situation. According to him, one reason for this continued strength is that there seems to be a shortage of scrap in Europe, especially shredded scrap. He added that, even though the markets in Mexico and India have quieted, the steady demand from Turkey has caused their buyers to continue to book cargoes from North America where supply has been available.

Looking at what transpired in the U.S. market last week, the case can be made for shredded scrap being fairly firm. Although, prices for shredded dropped $20/gt virtually nationwide, other grades like Busheling and P&S were down $30/gt – 50/gt. Since shredded only went down $20 after going sideways in May, its price is $5/gt over Busheling in some districts like Chicago and Detroit. It is thought that the steelmakers are afraid to price shredded too much lower. They need a reliable flow of shredded since it’s the staple of numerous melting programs. This activity seems to bear out that shredded supplies are under pressure as the numerous shredders across the country compete for feedstocks, which could dry up as prices wane.

It has been reported by several exporters in the U.S. that there is a growing demand for full shredded cargoes from all coasts and most sellers cannot meet these demands unless the cargoes also contain a significant amount of HMS 80/20, as most cargoes destined for Turkey usually do. After all, 30,000-35,000/mt for shredded at a time is one to two months of generation for most producers!

Given this situation, it would not be surprising if a floor on shredded scrap has now been reached. The exporters are waiting now for the next round of purchases from Turkey to see if export prices can remain firm even though the North American domestic markets have declined in price.

In other export news, China is considering relaxing some restrictions on what grades of scrap can be imported into that country. Since the Chinese revamped their import specification in 2021, there have been no imports of HMS1/2 80/20. This grade is the main export scrap grade throughout the world. If Chinese customs were to begin approving this grade for importation, it could have a dramatically bullish effect on scrap shipments from the U.S. and other exporting countries. A decision could come this summer.

RMU will follow up on this potential event.