Ferrous Scrap Prices Likely to Decline in September

Ferrous scrap prices are likely to decline further in September after a modest drop in August, agree Steel Market Update sources.

CRU Steel Analyst Ryan McKinley expects a drop of about $20 per ton across the board in September, driven primarily by an overhang of shredded scrap in the market and weak export demand. “There is a drop coming next month for sure and maybe the month after that, likely followed by a seasonal price correction in November/December. We’ll be looking at a tighter market towards the end of the year,” he said.

“Regarding September ferrous trading, the current chatter is for obsolete grades to trend down at least $20/GT and prime to move lower by slightly less,” said a dealer in the Northeast. “Some have suggested the drop will be even harsher, with the moves being down $30 for obsoletes and closer to $20 for prime,” he added, as exporters look to sell some of their September shred tonnage to U.S. domestic consumers.

The current price for shred to Turkish consumers is around the $310/MT CIF level, which is down by around $25-30 from the beginning of August, he said. 

“My sense is that we are at or very close to the bottom of the export market as U.S. exporters are going to have trouble buying at dock prices that are in the mid-$260s/GT on the East Coast.”  

The U.S. scrap market will be much weaker in September as mills are poised to drop prices as much as possible, agreed another SMU source.  The initial indications are for at least a $20 GT decline across the board.  However, shredded and HMS could weaken further due to ample supply and the recent lack of export activity, he said.

“The export market weakened by over $20GT in mid-August after a September cargo was sold to Turkey at $300/305MT for HMS/shredded, he continued. U.S. mills were already preparing to drop prices before this news, so this was a real gift to them. However, late last week, the sale was made to Turkey at $10MT higher than these prices, and when buyers saw the bottom may have been reached, several mills started to inquire about cargoes. So, this may stem the bleeding to some degree for the September U.S. market. But it will be down.

“Looking forward to Q4, the market in the U.S. may assume its traditional seasonal pattern. We can expect weakness in October and possibly mild weakness in November, followed by stronger December and January as winter sets in,” he added.