Ferrous Scrap Prices to Rise in January?

Written by John Packard

Domestic steel orders are strong and flat roll prices are on the rise, which means demand from the mills is likely to push ferrous scrap prices higher in January.

“All things are pointing up for ferrous scrap,” said a dealer in the Northeast. Obsolete grades should rise in higher proportions than primes, but all grades will feel the effects of the increased global demand. “The export market is red hot, and domestic mills will try to avoid having to buy scrap off the East Coast. This will be easier said than done as mills to the South and West will make sure ‘their’ scrap does not leave.”

“It’s highly likely the market will be higher in January. Scrap inflows are mediocre, but will likely get better next month with the New Year and better prices. Expect prime scrap to be up, as well, but maybe not as much as obsolete grades,” agreed another dealer in the region.

Mike Marley of World Steel Dynamics reports that scrap dealers are looking for another price increase in January, but it’s too early to pin down a realistic number. “Most are guessing that shredded and other obsolete grades, like heavy melt, will be up at least $10 per ton, but a few are looking for another $20 or $30 per ton hike,” he said.

Much depends on how hungry the mills prove to be this week. Some dealers may try to hold back some scrap in anticipation of higher prices in January. “Several mills are scheduled to work through the holiday, but if inventory of scrap is too low or shipments fall behind, that could be a problem. We could see some emergency spot market buys at higher prices,” Marley said.

Another variable is the strength of export demand. Turkish prices have leveled off at $350 per metric ton CIF for 80/20 HMS and $355 for shredded scrap, Marley said. Some South American mills have bought bulk cargoes recently from U.S. East Coast exporters, typically all-shred cargoes of 35,000 or 40,000 tons. Indian traders are offering $330 per metric ton for 20-ton containers of shredded scrap FAS the docks at U.S. East and Gulf Coast ports. That’s higher than the mill-delivered prices in Cleveland and Pittsburgh this month. Mills there had to hike their shredded offers by $40 per ton to keep local scrap from going to the docks and couldn’t buy any from the shredders on the Eastern Seaboard. Exporters are offering dealers as much as $300 per ton for the lower quality export HMS. U.S. mills are paying an average of $280-285 per ton for the higher quality No. 1 heavy melt, Marley said.

“Despite all the higher price expectations, dealers should remember that some mills now have their own scrap yards and might pull an end run like they did several years ago,” Marley added. “They placed big tonnage orders with a few major scrap processors during Christmas week. Some of the small and mid-sized yards came into January thinking they owned the market, but the biggest scrap consumers said they didn’t need much and wouldn’t pay higher prices.”

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