February Ferrous Scrap Market Trades Sideways

Pete Meyers, Vice President of Ferrous Scrap Sales & Marketing for Metalico advised Steel Market Update this morning as to what they saw for trading for the month of February:

“The Feb scrap market has indeed traded sideways.  There were instances of higher sales based on individual mills having to reach remote tons, and mills dropping prices because they didn’t have to pay remote.  Neither of which is significant enough to warrant attention.

Here is how we see prices:

Shred     $190-$200/gross ton delivered (gtd)
HMS     $160/gtd
Bush     $180-$200/gtd

It is interesting that shred is trading for more money than primes in most parts of the country. This reflects the difficulty of collecting shred feedstock vs. availability of prompt industrial scrap.  The steel mills are trying to melt as much primes as they can vs. shred.

The ferrous scrap market concluded relatively early as most dealers sought sales early feeling March pricing would be weaker. Mills bought early concerned more about short term flows and deliveries than potential to drop prices modestly.

Export sales looking forward continue to fade pricewise into Turkey with pricing around $175mt for heavy melt scrap (HMS). Freight rates are at all-time lows now @ $10 per metric ton on large bulk vessels NYC to Turkey. Exporters are still holding buy prices to cover previous sales. There were some domestic sales by exporters but for February there is not enough to change the market dynamics.”

A dealer in the Upper Midwest pegged the scrap prices at: HMS at $165-$175, shred at $190-$200 and busheling at $185-$195.

We spoke to a number of other scrap dealers who confirmed the sideways trend to February market orders and also a concern that March negotiations will result in lower prices for the dealers. We learned late this afternoon that SIMS, one of the large exporters of scrap, is beginning to tell the industry that they will drop buy prices by $10 per ton.

We are hearing from dealers that scrap prices will drop in March due to improving weather helping flows and an export market that is anticipated to remain weak. There are also seven cargos of European scrap destined for the Southeast and Gulf coast river areas which will help dampen demand in those regions come March.

However, not everyone is on the March prices will decline bandwagon. One of our sources out of the Northeast told us, “March prices being down? I’m not there yet. The mills didn’t get all that they needed in January. I think it will be the same in February.” He went on to explain that the reason why the deals got done at sideways numbers was that flows are bad and the mills didn’t get all of the steel they needed.

This source also pointed out that demand from the mills is “crappy.” He told us sheet demand was good but long products (such as rebar) and plate products are tepid at best.

So, we are of the opinion that March prices could end up being sideways to down $5 or $10 per ton but nothing much more than that.