Ferrous Scrap Pricing for November: Sideways, Higher, Lower?

Written by John Packard

When Steel Market Update (SMU) began talking to our ferrous scrap sources over the past couple of days, we got a variety of opinions as to where prices will go for the month of November.

From the East Coast we heard sideways was the most likely direction with a little “slightly stronger” for prime grades of scrap (busheling, bundles). The reasons being improved export pricing and seasonally slowing scrap inflows. At the same time, some of the tightening of supply will be offset by “U.S. domestic mill outages and less demand.”

We were told, “I expect flows to continue to slow over the rest of the year, as they normally do, and for demand to improve as steel mills begin to raise prices on the back of improving demand in the coming months.  So, we could see a sideways market in November and a slightly higher market in December. The most recent export sale this past week was $304/MT CIF Turkey. As much as the Turks want to push prices lower due to mediocre demand and a weakening currency, they are going to have a tough time doing so before the end of the year (though the degree of upside from here is a little questionable).  I expect U.S. trading to happen in the later part of next week.”

From the Ohio Valley, we heard that the TBD (to be determined pricing) orders will be executed early next week with the expectation that final pricing will be settled by the end of the week or at the latest early the following week.

Our Ohio Valley source told us, “Seasonal supply and demand issues will drive Nov/Dec markets. On the demand side, more numerous and longer lasting mill shutdowns will dampen scrap demand for the balance of the year. Year-end mill inventory restrictions and holidays will also contribute to less demand. On the supply side, the coming winter months and expected higher prices in January will help floor the scrap market in November and make a case for higher prices in the future.”

A scrap market source who watches the entire U.S. market told us that we could see some prices up $10 per gross ton as there were some “quiet” deals made at slightly higher prices as the month of October progressed.

We also communicated with World Steel Dynamics “scrap guru” Mike Marley who told SMU that he is “both optimistic and pessimistic this month.” He agreed with our scrap dealer from the East Coast regarding a stronger export market to Turkey and the fact that overseas scrap pricing did not drop as much as what we have seen here in the U.S. markets.

Marley told us, “Dealers can get as much as $290 per metric ton FOB a bulk cargo carrier for shredded and $290 to $300 per metric ton for containers loaded with shredded and dropped off at the docks. That’s better than they can get from domestic mills that are paying as little as $270 per gross ton for shredded delivered to their mills in Detroit and Indiana. Smaller mills on the coast had to pay $290 per ton and higher to keep shredded from going overseas. And still they lost a lot to the offshore mills. I think they’ll face the same price challenges in November.”

Marley believes the weakest markets will be the Midwest and South as there are excessive supplies of obsolete grades and industrial scrap at several steel mills, as well as some of the dealers. He also noted, “There is a steady supply of bundles and busheling coming across the border from Canada to the sheet mills in Indiana… From a broader perspective, that means the U.S. busheling users are not putting much pressure on the Detroit-area scrap yards that ship busheling and bundles to the BlueScope/North Star sheet mill in Delta, Ohio. That mill alone plays a key role is setting industrial steel scrap prices each month.”

Delta, as the mill is referred to by dealers, is the biggest user of prime scrap in the region. Delta influences what happens in Detroit. The Detroit mills wait for Delta to settle and then they either raise or lower their prices in line with the NS BlueScope mill.

SMU asked one of our larger scrap dealers if scrap prices are affected by the domestic steel mills raising sheet prices. The answer we received was interesting. “If rising prices are a result of increased demand, yes, if they are because of supply restrictions, then no.”

Pig Iron Price Offers

A pig iron source advised us, “Pig iron prices are slowly falling to levels to justify their use. This is a reaction to the September low residual scrap price drop of $40 GT. There have not been many buys lately as producers were hesitant about lowering price offers.  However, even though offer prices dropped $15-20 MT, this has not resulted in any major buys in Europe, Turkey or the U.S.  Mills could probably buy at $360 MT CFR NOLA, but they want to pay less; maybe $340 MT. But there are no offers at that level yet.”

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