Another Increase for Ferrous Scrap in July?

Ferrous scrap prices are likely to rise again in July on top of the $50-60 per gross ton increase in June – but just how much remains unclear, according to Steel Market Update sources.

“July expectations vary greatly,” said one dealer in the Northeast. “Most consumers are conceding prices will be up $20-50/GT depending on grade and region, while some are saying sideways to up $20 based on a stalled export market.”

Scrap prices will most likely rise, regardless of region and grade, for the following reasons, he said: Demand, especially in the Ohio Valley, will be partircularly strong in July. Generation of prime scrap will be off because production at automotive stamping plants is down by 25%. And inbound scrap flows typically slow down during the hot summer months.

Another scrap executive told SMU he is expecting a “no worse than sideways” ferrous market in July, and possibly higher settlements than in June. 

Prime grades are particularly tight with generation from auto stamping disrupted. As a result, those grades will be higher by perhaps $30/GT, “depending on how much mills really need to chase them, which we sense is somewhat aggressively,” he said. 

Shredded also seems to be in tight supply in certain areas where demand is particularly strong like the Ohio Valley and the South, he said. “The bottom line is that demand overall is very strong, and mills could have to bid for scrap to coax it into their plants, which could push the overall market higher by $20 or so,” he said. 

Otherwise, he sees a steady export market. “From when this rally began late last year, the main force pushing scrap higher has been export demand. Since early June, export prices have remained stubbornly steady, with rebar demand less strong than it had been after the CCP declared war on higher commodity prices. And uncooperative summer weather has taken hold in Asia. Next week should see Turkish buying for August, which could, at a minimum, stabilize and possibly increase prices from current levels of $500/MT CIF for 80/20. With steady export demand, prices in the U.S. are supported. But without a more aggressive overseas scrap market, it’s hard to see the U.S. market increasing significantly,” he said.

Pig Iron Market

Pig iron sales to the U.S. from Russia have experienced a $20 per metric ton fall from the levels prior to the announcement of the Russian government’s imposition of a 15% export duty on ferrous products, including pig iron and HBI/DRI, reported another SMU source. The duty goes into effect on Aug 1. Although the net effect of this is bullish for pig iron in general, Russian suppliers are trying to sell some of their production before Aug. 1 and it has resulted in lower offers into the U.S., despite last month’s $60/GT rise in prime scrap. So far, there have been two sales to the U.S. at $645/MT CFR for approximately 110,000 tons.  Offers to Brazil and Ukraine have been lowered, but nothing sold yet, he added.

By Tim Triplett, Tim@SteelMarketUpdate.com