Harris: Houston Disaster to Boost Scrap Prices

Scrap prices are likely to jump by $20 to $30 per ton in the short term as a result of the hurricane and flooding in Houston, predicts John Harris of Aaristic Services, Inc., who was a panelist at Steel Market Update’s Steel Summit Conference last week in Atlanta.

Harris did not have time to respond to all the scrap-related questions from attendees during the conference, but was kind enough to follow up with the following written responses.

Historically, the scrap markets hit a price valley in June as companies in the Northern Hemisphere go on holiday. Scrap prices normally hold in July, then see an uptick in August. This year, with the improved mill utilization rate, both July and August saw an uptick. With the disaster in Houston last week, a price increase of at least $20 is more likely, Harris says.

The Texas coastal region is a key provider of scrap via both rail and barges up the river system. The flooding from the record rainfall has slowed traffic considerably. As Houston is a major area for steel processors, a large amount of new steel will be required to replace damaged inventory. Thus, mills will need raw material. “Although the global scrap marketplace has backed off on scrap price increases, there may be an opportunity to ship more scrap to the NAFTA marketplace for the next two months,” Harris says.

Also supporting higher scrap prices are fewer scrap alternatives. Voestalpine’s Corpus Christi direct reduction plant was shut down prior to the storm. As they restart, they will find transportation for their product in short supply. Furthermore, Nucor’s Louisiana DRI facility remains down, which means more scrap will be required, Harris says.

He places current scrap prices pre-market at about $325/gt for shred, $285/gt for #1HMS and $390/gt for Bush.

“Steel mills have canvassed the market and are expected to start buying on Wednesday of this week. Many scrap suppliers are offering extra tons, which is an indication that October is expected to be a down month. As the steel mills have solid inventories, they are not interested in extra tons and could push markets down in some areas,” Harris says.