Ferrous Scrap Trades $30-50 Per Ton Higher in May on Tight Supplies

Written by Tim Triplett

Ferrous scrap prices for May have settled up $30/GT for shredded and up $40-50/GT for busheling as the coronavirus shutdowns have disrupted scrap generation and collection, resulting in extremely tight supplies. Higher scrap prices may lend support to the higher finished steel prices announced by the mills this week.

The tight supply is a more significant factor than the reduced demand this month, said one Steel Market Update source. Prices for all ferrous grades were higher than April across the board, though the extent of the increases varied. “The EAF mills clearly needed scrap after not buying much in April and taking some significant finished steel sales over the last few weeks. The tightest regions were in Indiana and the river mills where the auto plant shutdowns deprived the mills of the prime scrap they normally purchase.” 

For scrap dealers with larger tonnages for sale, the month-over-month price increase for prime grades was $40-50/GT making the prime scrap delivered mill price $315-$330/GT. Prime scrap increases in other regions were slightly more muted at up $30 from April. Shredded scrap and obsolete grades were generally limited to $20-$30/GT increases over April levels, though those dealers with tonnages to offer got $40 increases, he added. 

One dealer in the Northeast reported to SMU that May scrap prices in the Midwest are: Shred $265-280; Bush $315-325; and P/S $255-265. “Expectations for June are stable with some variances regionally. All eyes are on steel demand and the restart of manufacturing plants, which seem to be lagging expectations. Scrap yards are in the process of opening up to the retail trade and are starting to see increasing flows,” he said.

Export pricing has tapered off over the last few weeks. Turkish mills have some rebar demand but their weakening currency is limiting what they can pay for imported scrap. Despite some better demand for rebar, the CIF Turkey price today seems to be around $235-245 per ton, though no sales have been done from the U.S. in several weeks. These current levels are down from the last deals several weeks ago in the $255-$260 per ton level. In light of low scrap inventories at the U.S. docks, it appears for the time being that the scrap price is stuck in that $235-245 range, said one scrap executive.

CRU reports that Turkish steel export prices decreased for the third consecutive week, while Chinese export prices also fell slightly. Turkish rebar export prices are currently at $400 /t FOB Turkey (-$5 /t w/w), while Turkish HR coil export prices fell below the $400 /t barrier and are trading at $390 /t FOB Turkey (-$15 /t w/w). These are some of the lowest levels since March 2016. However, there are reports of mill offers as low as $375 /t FOB Turkey to stay somewhat competitive with Russian export prices, which were assessed at $360 /t FOB. “This means that while Turkish rebar producers could cut prices a little more and maintain profit, their scrap buyers will likely wait out a price upswing for as long as possible. While a relatively strong export market helped U.S. scrap prices rise in May, this very well may not be the case in June barring a substantial uptick in international steel demand,” said CRU Senior Analyst Ryan McKinley.

Looking forward, scrap supply should improve in May from April levels, but much of the northern part of the country remains in lockdown, especially the cities, and manufacturing plants are expected to come back on line but not until the second half of the month, and even then not at full strength. “So, we see the June trade being no worse than May as supply should remain relatively tight and demand from mills should improve,” said another source. “EAF’s will try hard to keep the price level where it ended up for May or push it down as their margins have narrowed significantly, but those with scrap in June will likely still have a strong hand to play in their negotiations with mills and could get sideways to slightly better pricing.”     

Pig Iron Market

“U.S. mills have expensive pig iron coming into New Orleans this month in the $350 per ton range. They have bought two or three June shipment cargoes at $298-305/MT CFR Nola, after staying away from the pig iron market for two months. Therefore, there will be a period when they will be short pig iron this summer at the time scrap will be scarcest. The Chinese supported the market during this time and blocked the Americans out. That situation will probably get even worse,” added another SMU source.

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