Ferrous Scrap Prices Down Sharply in January

Ferrous scrap prices are down sharply in January, settling $30 to $40 per ton lower than December, report Steel Market Update sources.

The decline was a surprise to many as scrap prices typically rebound in January following seasonal slowness at the end of the year. CRU Steel Analyst Ryan McKinley noted that this is the first December-to-January price drop since 2006, and the largest in at least two decades.

The primary driver of the declining scrap price is weak demand overseas. Scrap on the East Coast that would normally be bound for some export market has flowed westward into the Ohio Valley and even the Great Lakes region in search of buyers. “Mill buying programs were pretty steady, but inventory levels were not low at the beginning of the year and the mild weather has kept inbound flows strong into scrap yards,” McKinley said. “All of these factors coalesced to bring supply much higher than demand, resulting in the price drop.”

A dealer in the North said a decline of that size at the beginning of the year is highly unusual. “I have never seen that in a January when it’s normally time for mills to restock and their order books to pick up. Prices are pressured lower by a weak international environment. I expect continued firm demand and seasonally slow collection to stem the price drops from falling too far, but we are going to need to see better demand overseas for prices to stay at current levels come springtime,” he said.  

“The lack of export volumes and much lower export prices have increased the supply of shredded off the U.S. East Coast. Therefore, mills have little trouble dropping prices,” agreed another dealer in the Northeast. Scrap flows have not been disrupted by severe winter weather so far, allowing scrap yard supplies to build.  

Because of the weak export market pushing down scrap prices, the pig iron market has been inactive lately, reported one source. Several pig iron cargoes, purchased in October and November at higher prices ($380-387 MT CFR), are due to arrive in January. “So, U.S. buyers realize that the Russian and Ukrainian producers have no choice but to eventually drop their price offers since the USA is the only reliable large volume buyer on the international scene,” he said. “Expect the next round of buying for pig iron at around $350 MT CFR or below. The river system is a complete mess due to bad weather, fog and high water on the LMR. Cargoes of pig iron have been waiting to berth since around Christmas. So, some users’ deliveries are being seriously delayed.”