Ferrous Scrap Prices Move Lower in February

Written by Tim Triplett

Ferrous scrap prices for February are down around $20-30/GT for obsolete grades and $10-20/GT for prime grades, report Steel Market Update sources, adding to the downward pressure already being felt on finished steel prices.

“This price trend is in line with the 10-year average price movement for February,” said CRU Senior Analyst Ryan McKinley. “Buying programs are generally weaker m/m given that February is the shortest month of the year, but this year downward price pressure has been driven by supply. Winter has been mild throughout much of the country, which has both helped scrap collection and delivery rates to mills. Moreover, a price decline in the export market helped draw scrap inland and put yet more supply onto the market.”

As the market increased by $39/GT for the January domestic buy, many dealers sold a great deal of material, and with mild winter weather had little trouble shipping it. The mills are flush with scrap now, so the price had to drop, said one scrap executive. It is uncertain how long this downturn will last, but with flows reportedly good in the middle of winter, it should mitigate the seasonal increase in supply during “spring clean-up” in late March and April. With mill capacity usage solidly in the low 80’s, demand could eventually pull the market upwards. In short, scrap prices won’t stay down long term, he said.

“February ferrous grades traded lower than January as they normally do this time of the year, largely due to mills overbuying scrap in January, and February being a shorter month,” said another scrap exec. “This year, in many parts of the country, we saw a more pronounced downward move than some were expecting, and in other parts a downward move that left some wondering why it was not stronger.”  

He reported that East Coast and Southeast obsolete grades traded lower by $30. Further west into Ohio and the Midwest, obsolete grades traded $20 lower, while prime grades traded $10-15 lower. Midwest shred was around $280/GT as a barometer. Weakness near the coast and down south was due to particular weakness in the export market where 80/20 prices for U.S. scrap have fallen to $260/MT CIF Turkey, down more than $40 since the beginning of the year. “Rebar sales out of Turkey are a real struggle, and prices for rebar FOB Turkey have fallen to as low as $415,” he said.

“It’s no surprise that Turkish rebar mills have pushed scrap import prices down this much. The margin between their scrap buying and rebar sale prices has resulted in a serious squeeze on their profitability,” said McKinley. “With scrap now falling, Turkish mills have become more competitive and have been able to secure more rebar deals. Recently, in fact, there was about 45kt of rebar booked out of Turkey heading to the U.S., which should arrive at an average price of $615-620/ metric ton CFR Houston (duty paid). Those cargos should ship in February or early March.”

Looking forward, U.S. demand should stay relatively healthy into March as construction season will begin to impact steel demand, said another source. “At some point, we will have clarity on the Chinese virus, which has slowed down commerce there causing steel inventories to increase over the last several weeks despite some production curtailments. I anticipate that March will generally trade sideways unless export demand returns before the beginning of next month. If ferrous scrap prices don’t rise in March, I expect some improvement into April.”

Scrap price movements in the past few months have mostly followed their 10-year average. In that sense, the scrap market looks much more “normal” than it was this time last year, added McKinley. “Assuming this continues, March should trade $10-20 higher than February—but it is far too early to tell what will happen.”

Pig Iron Market

Commented another source: “Busheling is only down $10/GT, so apparently supplies are a concern to the mills. This should steady pig iron prices, which were forecast to drop. Pig iron prices have only come off about $3-5/MT from their highs. The latest Russian cargo netted the producer $348/MT CFR NOLA. That’s not much of a drop. It is worth waiting, however, to see what the Chinese appetite will be for pig iron as they slowly return from Lunar New Year. If they still have to same demand in place, pig iron prices are going nowhere but sideways to possibly up this year.”

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