August Scrap Prices Poised to Move Higher

Steel Market Update (SMU) has been in contact with our scrap sources who are advising us ferrous scrap prices will move higher as we get into August negotiations with the steel mills. We have been hearing scrap will move by a minimum of $15 per gross to $25 per gross ton.

“Ferrous grades will certainly be higher in August, by anywhere from $10-$20/GT in my opinion,” said an East Coast dealer. “The primary drivers are stronger export markets (latest deals are around $315/MT CIF Turkey for 80/20, which is up $20 in just the last month), and a rising mill utilization rate in the U.S. (in July at that).  The weaker dollar, improving economic conditions in emerging markets (especially Turkey), rising Fe ore and met coal, plus fewer and higher priced Chinese semi and finished steel exports are all supportive of rising scrap prices for the time being.”

Midwest dealers echoed the comments made by our East Coast source. One Midwest dealer to us, “Market will go up in August… All competing commodities are on the rise, all major international markets are moving up, and domestic demand is increasing. Only question at this point is how high and will September be even higher? To equate the domestic prices to recent export sales, we are looking at minimum +15.”

Scrap guru Mike Marley of World Steel Dynamics reported to his readers earlier this week that scrap supplies could tighten because dealers are facing reduced flows into their scrapyards, the continued shortage of railcars and stronger scrap demand from offshore customers.

Status of Pig Iron Market

One of our pig iron sources has advised us the Ukrainian pig iron supply is back and after some initial low-ball sales to generate cash flow the numbers being quoted now are higher. Here is what he had to say to us earlier today, “Pig iron has made a decent comeback in pricing.  After the Ukrainian supply came back on line, there were cargoes sold at down numbers ($345-350 MT CFR) mainly for cash flow reasons.  But that has seemed to abate and upward pricing has reappeared.  Offers for Sept/Oct cargoes are $375-380 MT CFR NOLA/USEC.  There is very limited supply of low P BPI (Brazilian pig iron) ex Brazil, so the replacement for this, is Russian and Ukrainian which is always low P.  There is additional supply from Ukraine in the works and for this reason, I don’t expect BPI prices to go off the chart.  But as long as prime scrap in the US stays strong, pig iron will too.”

Stronger domestic steel mill order books and higher weekly production rates will help keep scrap prices higher through August and into September.

We will have more details on negotiations and where market prices settle toward the end of next week.