November Scrap: Settling or Working Off the Bottom?

Ferrous scrap prices for the month of November began coming into focus on Friday with SMU scrap sources advising prime grades as being down $10 per gross ton compared to October levels. Obsolete and cut grades were reported as trading sideways (same prices as October).

Not all regions are trading at the same pricing or even moving in the same increments. One of our Chicago area scrap sources advised that his company was moving down $10 on primes and sideways on other grades. Another scrap source on the East Coast reported some of the Chicago-area dealers and those in the Southeast as tracking sideways and not lowering their prime pricing.

Scrap guru Mike Marley of World Steel Dynamics reported to his readers that mills in the Detroit area dropped their offers on prime grade by $10 per ton since fewer mills have a need for the product due to maintenance schedules. A good example is North Star BlueScope in Delta, Ohio, which is only buying 60,000 tons of busheling instead of the normal 90,000 tons.

Steel buyers watch scrap prices carefully for clues as to where domestic steel mills may take sheet prices over the next few weeks. The sideways to down pricing coming on the heels of a $30 to $40 per gross ton drop in scrap prices in October, on the surface, is not supportive of more mill price increases. That is certainly not to say the mills won’t try…

Exporters of scrap have plenty of orders to fill and they have not been a factor in lowering prices inland.

Pig Iron Not in Great Supply

One of our pig iron sources had this to say about pig iron pricing and supply:

“Pig iron is not in great supply. The Russians are cutting back in favor of making steel. The Ukrainians will continue to sell what has to move, and Brazil does not produce very much low P material anymore. Prices are at about $350 cfr now with some downside still ahead, unless scrap firms up, which it should.”

10 Percent Rise in Scrap Prices by New Year?

One of our scrap sources reported the following to SMU over the weekend:

“November trading wrapped up on Friday with obsolete grades generally trading sideways from October levels and prime trading either sideways or down $10/GT from last month.  Lower demand at U.S. mills due to planned outages offset some upside pressure from rising export demand and pricing for bulk cargoes and containers. The U.S. outages did allow a few mills in the Detroit region and a major U.S. broker/consumer to drive prime prices lower by $10/GT for limited volume transactions, though prime traded sideways from October in many other districts, including Chicago and in the South.

“Both the scrap and finished steel markets seem clearly to have bottomed in October. We think the decline in prices from September was seasonal, and that seasonal moves, as well as the resumption of operations at Nucor’s DRI plant, allowed mills to aggressively push prime prices lower and narrow the wide spread between shredded and prime, which had existed since earlier this year.

“Going forward, we expect muted demand in December due to more planned U.S. mill outages, but less scrap supply will keep prices no worse than sideways and could possibly push them higher. Depending on how much upward price movement we get in December, that will tell how much higher prices move in January when mills enter the market to replenish what will be very low year-end scrap inventories. It would not surprise me to see a 10 percent or more price move higher between now and the January trade.”