Early Scrap Down $25-$40 on Shred/Obsolete and $10-$35 on Primes

Over the weekend, we were able to discuss the status of ferrous steel scrap negotiations for February with a couple of scrap dealers as well as one individual associated with the pig iron markets.

The Detroit areas mills were the first to settle and the decline in shred and obsolete grades was not as dramatic as some thought it could be. One of our sources told us, “Regarding the scrap market, looks like the Detroit area bills came out down $25 for cut grades and shredded but only down $10 for prime.  This intelligent move caught Nucor and SDI by surprise.  Those mills are trying to force the market down $30 across-the-board.  Whether they’ll be successful remains to be seen.”

One of our sources on the east coast provided some detail to a couple of the markets and thoughts on what will happen from here:

“Several districts had traded February scrap as of the close of business on Friday, but a lot of trading remains to be done early this coming week.  US demand, as anticipated is strong.   There is tonnage available from export docks to move into domestic markets but not an overwhelming volume by any means.  

“The Detroit market settled down $25/GT for obsolete grades (call Feb shred $280-85/GTD) and down $10 for prime grades (call Feb prime $300/GTD).   Recall though that one major Detroit region mill did not buy remote shred in January so the downward move does not seem as dramatic as some were expecting.  The Philadelphia market settled down about $35/GT for HMS, P&S and busheling.  Shred was down about $40/GT.  Mills’ ability to push prices lower in Philadelphia was the result of their proximity to the export docks and mediocre mill demand.  Export docks are paying around $170-$190/GT for 80/20 HMS.   I also heard of some trading in the Pittsburgh region for shred at down $30-$35/GT.  

“By the end of the week last week, it certainly seemed that the market was bottoming and firming around these new levels.  Most dealers were decidedly opposed to selling scrap at down more than these price cuts after a strong shipping month in January and low dealer inventory levels.  As a result most dealers expect March to be no worse than February as inflows are already slowing from their January pace.   

“Of course, as always, the wild card is export demand.  There have been six plus export cargos sold from the US East Coast in the last two weeks, the most recent at $240ish cif levels for 80/20 HMS.  That’s enough to clean up the on-hand inventory but much less than we have seen foreigners buy compared with their historical procurement patterns.  With the current inventory levels on the docks we are looking at March shipment at the earliest for future cargos.  So, sentiment for export is that we are probably at the bottom for pricing as well.”  

Pig iron is reported to be trading in the $320-$330 per metric ton, CFR, New Orleans (NOLA). We were told that Russia, where much of the pig iron is coming from, is still having issues with coking coal.

SMU will continue to advise our readers on the final settlements in the scrap markets as information becomes available.