Higher Scrap Prices Expected in October

Following on a big jump in ferrous scrap in September, scrap prices are expected to move higher for obsolete grades and sideways or higher for prime grades in October, lending further support to rising finished steel prices.

“Domestic steel capacity utilization and prices are rising, but the large price increase last month has not resulted in dramatically higher inbound flows to dealers’ yards,” reported CRU Senior Analyst Ryan McKinley. “We’re still expecting higher prices for obsolete grades domestically, probably an increase of $10-20 /l.ton m/m. However, prime grade flows are stable, and I see little upside for those prices especially when considering that pig iron prices are falling internationally as Chinese demand wanes.”

Export demand from Turkish buyers has eased somewhat, which will limit the potential upside for U.S. domestic obsolete prices, he added.

“We expect to see strong sideways to higher ferrous markets in October depending once again on the region. It’s an unusual move for prices to increase in an October trade, but then again 2020 is anything but usual,” commented a dealer in the Northeast. 

Scrap demand and pricing will vary by region, he continued. The Midwest and Ohio mills will have to raise prices more than southern and eastern mills, in all likelihood, as Midwest demand has been slower to ramp up over the last 60 days and the Midwest has been less impacted by the export demand pull toward the eastern and Gulf coasts. But demand in the U.S. is clearly getting better. 

“I expect shred to move anywhere from sideways to plus $20/GT in the East and South, and plus $20-$30 in the Midwest. Busheling should see a strong move higher everywhere by $20-$30,” he added. 

“Export seems to have cooled off for now with Turkish and Asian demand tapering,” said one dealer. “Prices for 80/20 above the last sales around $305 CIF seem like a stretch now, but all are trying to figure out if it’s a pause before more sales resume at those or higher levels, or if we have topped out for now.” 

He added: “From here, though, it’s hard to see U.S. prices falling much if at all between now and the beginning of 2021 as supply remains too tight, export demand should stay decent, and U.S. demand continues to improve.” 

Pig Iron Market

Sources tell SMU that U.S. mills bought three cargoes from Russia/Ukraine at $385-$387 CFR. That’s $25/MT higher than two weeks ago and up $55/MT from July’s Ukrainian gift cargo.