Final Thoughts: Which way will the wind blow in April

On the eve of the April ferrous scrap buy, there is no firm consensus on the market’s direction. The safe predictions are “soft” sideways to “strong” sideways, which may mean down $10/gt to up $10/gt.

RMU has heard two mills in the Great Lakes region have canceled March orders, presumably in hopes of buying down in April. This is not usually a good sign for a market to hold sideways. But their mill-owned competitors have approached dealers for sideways prices and, in some districts, even up money. This is a bit unusual and one can’t be sure of the rationale for the split opinion. Maybe soft-to-strong sideways was right all along.

RMU spoke to a trader in the Ohio Valley who estimated there are several mills in the US who have an outage planned for April. He added that “another two mills will not have full programs.” This is a definite headwind for scrap prices.

There are several tailwinds, however. As mentioned in previous columns, the export markets have firmed significantly. Pig iron prices have also climbed. The likely impact of an April price decline on shredder feed is thought to be negative. It’s also not clear about whether some mills have sufficient inventories of scrap.

Some players in the scrap industry have opined that some mills with cutbacks or outages may view their April needs as minimal thereby allowing them to take their prices down. On the other hand, some mills may need to buy their regular complement of material, and they are loathe to take chances at down prices which some sellers may resist – especially with what happened to the January buy and to a lesser extent in February.

At this point, we are not sure of the market’s ultimate direction, but as usual, it will be become clearer in the next few days.

The trade is reporting the scrap buying from the mills will kick off yet this week as opposed to next week. RMU will report on this as soon as events occur.