Ferrous Scrap Prices: Prime Grades Down $20, Obsoletes Sideways in February

Ferrous scrap for February is settling at sideways prices for obsolete grades and down about $20 per ton for prime grades, report Steel Market Update sources. This latest dip follows on a $30-40 per ton decrease in January, largely attributed to weak demand from overseas.

“A rising export market, which curtailed East Coast suppliers from shipping domestic, and extended winter weather were the two major factors in stemming the drop of obsolete grades,” reported one dealer in the East. “As the trading week has progressed, momentum has shifted clearly into the sellers’ hands. Mills are still looking for scrap and dealers are holding out for higher prices.” The scrap market is poised to rise in March, he predicted, as export prices continue to climb, weather may continue to slow inbound flows and finished steel prices increase, raising consumption rates.

Another dealer in the Northeast said prime scrap is down $20 in the Midwest, but only $10 lower in the South. “The February buy period ended with considerably more firmness than it had when it began thanks to a continued rising export market and poor inbound flows following the bad weather most of the country experienced in January. Some late obsolete sales may have been done at slightly higher numbers reflecting that firmness,” he said.  

Looking ahead, he believes this bodes well for March shred pricing. “Obsoletes could see increases of $10-$20 in March from February levels. We could see a small increase in prime scrap next month, as well, but probably not to the degree that obsoletes will achieve,” he said.  

Export grades have strengthened by $40 or more over the last three weeks. Low Turkish scrap inventories, rising global steel prices and better domestic rebar demand in Turkey have allowed rebar producers there to widen their metal spreads back near the $170 “break even” level from where they plummeted just a month ago, he said.   

He also expects a modest pickup in pricing next month. “I don’t really think we will get back all the pricing scrap has lost since December, but we should get some. Into April, I expect yard inflows to improve and for the supply-demand dynamics to be more balanced once again. We could see scrap prices drift lower as we move through spring in a typical seasonal move. Absent sharply rising demand for scrap from overseas—which in light of global economic conditions seems a bit of a stretch—I don’t see dramatic swings in U.S. scrap pricing from around current levels.”  

Concurred another SMU source, “the export scrap market has continued to bounce back with some real teeth.” In the last five weeks, the price of HMS 80/20 and shredded have gained close to $50/MT. Sales prices today from the U.S. East Coast stand at $325/MT for HMS and $330/MT for shredded delivered to Turkey. “Ocean freights to Turkey have come off $5-8/MT from 2018 averages. And it’s not only Turkey; Mexican and other South American mills are seeking offers,” he said.

This sudden price rise has put shredded for export on a par with domestic USA pricing, he continued. Although buying for February shipment is not complete yet, busheling grades have dropped $10/GT to $340/GT in the South and $20/GT to $355/350 GT in Chicago/Detroit. “These prices met with dealer resistance but snuck through. Shredded and other cut grades held sideways, but again there was resistance due to lack of regular flows. Prices vary on shredded between $315 and $325/GTD depending on the region,” he said.

“Looking ahead to March, the consensus among the trade, including some mill buyers, is that the market has definitely bottomed in the U.S. and March will be much stronger. How much remains to be seen,” he said. “But when this type of increase in export prices happens and there is muted price action during that same month, the next month usually shoots up strongly,” possibly as much as $30-40/GT for shredded and $20-30/GT for busheling. “The dealers are very aware of the $40/NT price increases on coils and they will drive a harder bargain for March scrap,” he added.

Commenting on the pig iron market, he noted that U.S. mills bought a series of pig iron cargoes in January from Russia/CIS at price levels of $345-350/MT CFR. “There are plenty of cargoes arriving in February and many arrived in January, so no need to book further material for now. The producers want higher prices, but I believe they’ll have to wait.”