Ferrous Scrap Prices Set to Rise $10-$30 in June

Based on channel checks with our scrap sources, we are hearing that many of the steel mills have been actively buying as much scrap as possible during the month of May. The extra tonnage being added to the early May tons are being purchased at higher prices. Prices are up as much as $10 to $20 per gross tons on the extra purchases being made.

However, not all of the dealers have extra tons to give for May shipment. “Mill inquiries for June scrap began last week, without much success as dealers work to complete May shipments and assess the markets,” one of the larger dealers told us. “Pricing trends are likely to be disparate and broad-based as geographic and/or inventory factors impact negotiations.  At this stage, we could see scrap pricing higher by $10-30/gt in June and potentially even stronger heading into July as prompt industrial supplies contract.”

The main culprit driving prices is the lack of supply on many of the obsolete grades. This is due to the lower buy prices being offered for new scrap by the scrap yards. The lower buy prices are due to the collapse of scrap prices earlier this year.

One of our sources located in the Ohio Valley area told us, “Lack of supply still deciding factor.  Increased demand in Chicago and to lesser extent Ohio Valley combined with export will drive prices higher. Most suppliers feel an increase of at least $15 will bring more tons. I know of sales in Pittsburgh at up $20 taken last week.   Rumors of large consumer/broker paying up $30 for quiet deals to ensure tons. SDI already paying $300gtd for shred in MS.”

We have heard from a number of sources that US Steel and ArcelorMittal are expected to return as active buyers for their Northern Indiana mills.

One of our East sources advised us, “We are going to see a continued, supply-constrained rally in scrap in June – generally up $15-20/GT+ depending on the region.  DJJ [David J Joseph owned by Nucor] was buying every ton of scrap they could get their hands on in May, and they did end up buying a decent amount including a good bit out of the OH Valley where there was an overhang due to all the lack of buying.  SDI is still looking for scrap, and some of the mills in the OH Valley that have not bought scrap for the past few months are planning to start buying again.  I am expecting the rally for at least 60 days.  We just don’t have much scrap inventory in the way of obsolete grades.”

Scrap prices are set to rally but, without expanded exports of ferrous scrap the rally may be muted. Demand for scrap exports helps put a bottom to domestic prices. Lack of demand helps put a top to prices as those tons are pushed into the domestic markets.

It was explained to SMU by one of the dealers this way, “Exporters generally do not have much inventory either.  Prices seem to be $290/MT CIF give or take but I have not heard of new deals for over a week.  If we are not careful though, considerably higher domestic prices could see a top if export demand does not improve.  At some point the exporters will offer some tonnage to domestic consumers, if for no other reason than to cool off the domestic market.  The scrap to billet delta is, I don’t think more than $100 right now and actually less.  So I don’t think exporters have much leverage to push export prices higher.”   

The expectation is we will not see new June deals until the later part of next week (Monday is June 1st).