Ferrous Scrap Pricing May Have Bottomed…

Scrap prices were forecast a week ago to drop $10-$20 per gross ton in November. However, we are beginning to hear that the scrap markets may not be as dire as predicted and the numbers may be much closer to sideways than down once the negotiations are concluded next week.

One of our scrap sources shared his thoughts with us earlier this week:

The market is not as weak as the mills would have you believe.  The only people who I have been hearing that from are the mills themselves!  Flows have already slowed to a trickle because of price drops over the last few months and the weather has not even turned bad yet.  Scrap is much tighter than the mills would have us believe.

Export has stabilized on the back of tight supply and seemingly fewer billet sales into Turkey (at least I have heard the Chinese and CIS sellers are not reducing prices below the $250-$260 gif level).  Lower iron ore prices are a bit of a concern, but I don¹t have a lot of confidence they will drop much below the mid-$40s if they even get that low.  

I have not yet heard better numbers that the exporters would offer to dealers, but the exporters have been more aggressive locally as at least one (EMR-Camden) is short scrap.  Container business has picked up a bit as well.  Domestic business may be poor but mills will not be able to buy at down money for November unless they get lucky and pick off some dealers very early on.  In fact I have even spoken with some dealers who have indicated they have started to hold some scrap in anticipation of better prices in the coming months.  I don¹t expect a dramatic increase but I certainly think we have hit bottom for now and probably through the winter absent a more than $10/MT drop in iron ore from current levels.

I am calling the market sideways at least for November and slightly higher for December.

A second source told us to expect sideways in some markets to slightly lower in others. We were told the market drivers were imports (scrap), the stronger dollar and weaker than normal scrap exports.

We also learned that the Russians have been over-producing pig iron driving prices down to $185 CFR which equates to $210-$215 per gross ton delivered to the domestic (USA) steel mills.

If scrap prices either have bottomed or will during the month of November this could help the psychology of the steel markets as buyers try to figure out at what point in time they should begin to buy again.