Final Thoughts: scrap community copes with large drop

As the month of March goes into the second half, the scrap community is trying to cope with the large drop in ferrous scrap earlier this month.

Has this drop affected flows in several key districts? Will prices continue downward in April? Where is the pig iron market heading? How are the steel mills operating? There are various opinions on these subjects.

We reached out to a Chicago-based trader to see what he thought about the market. He said things have been quiet lately. He did not think scrap flows have been severely affected by the recent price declines. But he said, if the prices drop much further “flows will be affected.”

Ray Peterson of Memorial Resource Group, a contributor to RMU, in his article, is a bit more skeptical. Peterson put forth some arguments which point to several reasons the scrap market may be bottoming soon.

Regarding pig iron, the market is stalled in Brazil at this time. Brazil has offered material for May shipment at $430/MT FOB, but US mills want it cheaper. So far, there have been no deals concluded.

RMU contacted a US-based pig iron trader who said pig iron prices will hold at this level and could increase on a delivered basis since freight rates have risen lately. He predicted a CFR price of $475/MT on the next series of purchases. This would be up from the last price of $460/MT CFR. It should be noted that the US mills need to buy more pig iron from Brazil, since shipments from Ukraine are severely limited. So, it’s questionable that US buyers can lower prices any further.

According to several other players in the scrap community, mills are still interested in buying material, and demand for scrap is still relatively good. Therefore, a plurality of dealers and brokers are of the opinion that the April market will trade basically sideways. However, many acknowledge that, “they have been wrong before.”