Ferrous Scrap Pricing for May “Strong Sideways” to Slightly Higher

Written by John Packard

It is the first week of May and the negotiations between the long and flat rolled steel mills have been in full swing all week. By late today (Thursday) word of how the scrap dealers had fared has been coming into our offices. The first region to settle was Detroit which was up $10 on prime grades with busheling coming in at $360 per gross ton delivered. The other items remained unchanged with shredded scrap at $300 per gross ton and #1 HMS at $275 per ton.

With the domestic steel mills not canceling their April open scrap orders that had not been delivered by the last day of the month, we had an early indication that the mills were expecting sideways to slightly higher numbers.

This evening we heard from one of our scrap dealers on the east coast who told us solid demand at the mills and limited export tonnage coming off the docks here in the U.S. helped keep the market strong. “I would call the May market strong sideways in general with mills in the Ohio Valley and Pennsylvania raising prices for shred and cut grades $5-$10/GT over April levels.  Mills in other regions were able to keep prices at April levels.  Prime scrap generally traded sideways too, though we saw pockets of strength and higher prices in the east to catch up with other areas of the country.  There is still some concern amongst the mills about prime scrap supply despite the exception of import cargos due to enter the US during May and June and rumors that by July pig iron should retreat.”

Negotiations in the Ohio Valley were intense over the course of the past week. One of our sources called it a “Mexican standoff” with the mills demanding sideways pricing and the dealers wanting $10 per gross ton more than last month. “The May market has been a Mexican standoff over the past few days with consumers wanting sideways and suppliers demanding up $10gt.  At this writing the suppliers are winning the battle especially in the Ohio Valley region.   In this region, shred prices are up $5-10gt trading at $305-310gtd and cut grades are up $10gt with plate trading at $310gtd and hms @ $285-290gtd.  Primes, which many thought would drop, are trading sideways nationally and in some pockets the prices are up $10gt.” 

John Harris, former head of scrap sourcing for ArcelorMittal, provided a detailed look at what has been moving ferrous scrap prices in NAFTA as well as the rest of the world:

“Markets in May are trending sideways in NAFTA as a result of limited scrap exports & no major changes in utilization rates. This is not uncommon for this time of year as June historically is the year’s low point for scrap prices. Further, we are into the lead-up to Ramadan in Turkey which results in lower scrap import demand for approx. a 6 week period.

“We are seeing pockets of activity for scrap demand which is a reflection of local & regional market activity not being affected by larger export movement or higher demand for scrap from remote regions.

“If we look at price influencers globally, the following is occurring;

1.0    China is exporting scrap @ $20/mt under normal market values into Vietnam, Thailand & Malaysia <$240/mt C&F 80:20 HMS.  This is messing up Japan & NAFTA WC scrap shipments. If they continue with larger volumes, this could drive down semis & finished steel prices in the region.
2.0    Turkey’s 80:20 HMS prices are fluctuating around $270/mt C&F which means $220/mt NAFTA entering ports.
3.0    Nucor has repeatedly imported Busheling from EU on quarterly basis (~5-7/quarter) & it appears they are increasing their imports with more than normal cargoes of bush & shred. This could be a result of ongoing problems with their DRI production levels.
4.0    Expect scrap cut grade prices to continue to soften as imported long carbon steel is down with lackluster demand. Further coal & iron ore prices are holding with spot price drops occasionally occurring as China consumed its port excess inventories (currently around 130 M mt when normal is between 80 &100 M mt).

“I still expect that scrap demand & utilization rates will not increase until around late August. By then, China’s scrap export trend will be established, which will directly influence scrap imports from outside of region & potentially create a semis export market for the regions steel billets. This could directly influence Turkey’s decision to buy scrap or billets in 3rd quarter.

“This is my quick take on the market for next 3 months (May to Aug) with Aug potentially seeing some different dynamics. The global politics are continuing to adjust & regional turmoil continues to occur, it’s a black box out there.”

John Harris will be speaking on the topic of scrap and how it affects mill costs at this year’s SMU Steel Summit Conference in Atlanta.

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