Ferrous Scrap Price Roundup

As reported last week, obsolete grades of ferrous scrap came under price pressure as negotiations concluded for July deliveries. Prime grades, however, saw prices move sideways as the spread between shredded scrap and primes increased.

The product that saw the most movement was shredded due to excessive inventories and little movement on the export front off the east coast, which caused some of the exporters to offer shred into the domestic markets. Cut grades (like HMS and plate & structural) were not down as much as supply was tighter. Prime grades continue to be in tight supply with strong demand from the EAF sheet mills.

Our sources reported Midwest scrap prices as being:

Heavy Melt (HMS) = $220-$225 per gross ton.
Shredded scrap = $240-$245 per gross ton.
Busheling/Bundles = $290-$310 per gross ton.

On the east coast we heard scrap prices are as follows:

HMS = $190-$210 per gross ton.
Shredded = $215-$225 per gross ton.
Busheling/Bundles = $260-$280 per gross ton.

When asked about what the future holds for scrap prices, an executive with a Midwest scrap company told us, “Continuing downward pressure on obsolete scrap grades from slacking export prices and subsequent lower offers from eastern seaboard shippers looking to move material domestic.  This dynamic will continue through Aug most likely resulting softer pricing for these grades. Primes on the other hand are still in tight demand with flat rolled producers running strong.  Prices should remain stable through summer with downward pressure into Sept from lower priced pig iron, HBI, and DRI infiltrating the market.”

An executive from the east coast reported their prices as being lower on cut grades and shred which they thought would continue into August due to reduced demand expected from July levels. They also believe there will be import opportunities due to currency exchange rates and there will continue to be a lack of U.S. exports which will pressure domestic prices.

From the east coast source we were told South scrap prices were $240-$245 per gross ton on shredded.

We were told, “Come September, however, I expect there to be less shred available, and then even less again in October.  So even if shred prices dip lower in August, we should be starting the process of forming a bottom.  We are now approaching price levels we last saw in March this year.  Those levels, which had been in place for about 4-5 months really killed the scrap collection incentive for many peddlers, and we expect to the extent it came back over the past few months it will disappear again.  In addition if there continues to be a lack of prime scrap available flat roll mills will have to purchase shred in lieu of busheling.   So once we hit the August levels, the risk of lower scrap prices in the months following that goes down significantly (though the spread between prime and shred prices could narrow from the current $50-$60 range where it is now for the first time since 2013).”

One of our pig iron sources advised us that there are offers out there for pig but not many mill buyers, “There have not been many offers that US mills want to accept.  Most offers are coming in at $280-290 MT CFR after hovering over $300 for the last six weeks.  But mills are living off busheling and bundles at $30-40 GT cheaper for now.  Nucor is using DRI and has turned down offers for pig iron if its not the right price.  Supply of pig iron is not excessive right now.”

We will now watch to see if flat rolled prices react to the new scrap prices or if we will see the mills maintain the status quo. We will know more over the next few days and weeks. For now, the SMU Price Momentum Indicator is pointing to Neutral.