Ferrous Scrap Prices Expected to Rise Again in November

Steel Market Update sources are expecting another $10-$20 per ton increase in ferrous scrap prices in November, much like the bump seen in October.

“If there is a $10-$20 change, shredded scrap will be on the higher end, given typical seasonal slowdowns and lower scale prices,” said CRU North America Steel Analyst Ryan McKinley. Some sources tell McKinley the increase next month could be as high as $30 if mills start buying for December.

Scrap prices typically increase late in the year as inclement weather slows scrap flows. Fewer shipping days in November and December usually translate into higher prices in January. “The next three months are probably going to see prices up, though I could see December being flat,” McKinley said.

Strong domestic demand, seasonal issues coming into winter and lack of scrap inventories will all contribute to higher scrap prices through the end of the year and into first-quarter 2019, agreed a dealer in the Northeast. Recent improvement in the scrap export market will have a direct effect on domestic prices in November, he added, moving expectations from up $10 to up $15-$20 per ton.

Predicted another dealer in the North: “Look for U.S. domestic ferrous markets to rise by $10-$15 in November driven by seasonably weaker inflows, solid U.S. mill demand, and mills’ desire to get some additional tonnage on order heading into the end of the year.”

He sees weakness in the export market that will cap the ultimate rise of the U.S. domestic scrap price moving forward. “At the current export prices (80/20 cif Turkey $333/MT), it does not pay for the Turks to buy lots of billet to replace scrap. But the scrap-to-billet spread has narrowed considerably in recent weeks (now around $120-$140) and the scrap-to-rebar spread is as narrow as it has been in a long time (now around $165-$170), which is close to breakeven for the Turkish mills,” he said.

Also, demand in Turkey for rebar is significantly weaker, which is limiting Turkish mills’ ability to raise the finished rebar price. “While the U.S. may remove the second 25 percent tariff it placed on Turkish steel in August, between the initial tariff and the antidumping and countervailing duties still in place, the U.S. is not a viable outlet for rebar from Turkish suppliers,” he added. “So, the bottom line for now is that seasonally weak U.S. inflows will put a bottom on the U.S. market, but export weakness will cap prices around where they will end up in November unless and until rebar demand and prices rise.” 

Scrap analyst Mike Marley of World Steel Exchange Marketing also reports that dealers are anticipating ferrous scrap price increases in November that match those in October. They look for cut grades and shredded to rise by $20 per gross ton while busheling and bundles may be up by $10 per ton, he said.

If prices rise next month, they could vary from region to region because of the differences in demand and supply.  Shredded and cut grades could climb higher in the South, where feedstock flows are still poor. In the East, on the other hand, exporters are keeping a tight rein on their buying prices because they have not seen much activity from Turkey. The overall strength of domestic steel demand is still the main driver of scrap pricing, he added.