Ferrous Scrap Prices Roar with Primes Up $50-$80

Written by John Packard

Flat rolled steel order books have been helping push ferrous scrap prices higher for March delivery to the domestic steel mills. Steelmakers have paid $50 to $80 per gross ton higher prices than February for prime grades such as busheling and bundles. Sheet mills pushed their buying prices in order to get the supply of prime grades needed. The addition of Big River Steel into the buying mixed, Nucor having issues with its Louisiana DRI facility and limited pig iron coming out of Brazil and Ukraine have all helped tighten the prime scrap markets.

Busheling prices in the northern USA range from $360 per gross ton to as high as $400 per gross ton.

Other grades of scrap have moved higher as well. Our sources are advising SMU that obsolete grades and shredded scrap have increased $35 to $50 per gross ton depending on location.

One of our Mid-Atlantic scrap sources told us pricing was stronger in the north, “Generally speaking cuts and shred are up $40 gross ton (GT).  $320-330gt and primes are up $60gt.  $380-400gtd in all northern markets.  Southern markets are happening now with increases of $20-30gt on cuts/shred and up $50-60 on primes. There are rumors of offers from US exporters into Turkey at the $320gtd range for shred  (up 25-28gt).” 

Another one of our scrap sources located in the east provided the following insights into the negotiations and final prices when he told us:

“February was an aberration as we discussed – exporters panic-sold.  March roared back because of the Feb drop (and poorer flows), seasonal stronger mill buying patterns, better real demand compared to last year, and no DRI and HBI available.

“Dealers knew March was a good time to liquidate inventory, and so they offered a lot of scrap into the market.  March typically is a good month to sell a lot of scrap, ¬ it¹s before the spring flows kick in so material is still tight but will get easier to buy, and mills have a good demand because it¹s a long month and it¹s at the beginning of their busy production season.  So, with all the scrap offered, especially shredded, the market for that and other obsolete grades got a little weaker over the course of the buy.

“March prices settled at prices higher than February by $40-$50 for obsolete grades and $60-$80 for prime grades, depending on the district and the degree of the that district¹s February decline.  In the heartland markets (Mid-west), price increases were closer to the lower end of those ranges as the February drops were not as severe.  East Coast increases in March were stronger as their February drops were more impacted by the export weakness at the time. The South had some outages and reduced buys in March (SSAB Alabama and weaker and expected buys in Columbus, MS), so that tempered their increases a bit as well.

“Expectations heading into April are that the market could back off a little more as flows get better but there are a few potential mitigating factors to keep that from happening, ¬ at least dramatically – including:

(1) improved export demand (big ?),
(2) improving US operating rate and more price hikes,
(3) shallow inventory positions at OEM and service centers, and
(4) whether scrap inflows actually match the large March sale positions of the dealers.

“There is a decent chance all four of these things happen, or at least three, which makes me think we are relatively steady into April.  That¹s not to say we won¹t give something back next month, especially on prime if the DRI plant actually is back on line, but we probably do not fall out of bed as they say.”

Steel Market Update received a note from Nucor this afternoon advising their Louisiana DRI facility will be back in operation later this week, “Repairs at our Louisiana DRI plant are ahead of schedule and we plan to restart the plant this week. An equipment failure resulted in the need to temporarily suspend operations. This temporary suspension in operations has not impacted production at any of Nucor’s steel mills, nor has it impacted our 180 teammates who work at the DRI plant.”

The large increases in prime grades will most likely translate into a new round of price increases. SMU expects another $30-$40 per ton announcement could come as early as later this week or early next week once the steel mills hold their Monday morning sales meetings.

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