June Scrap Outlook Weak, Turkish Election Leads to Uncertainty

June is expected to be a weaker month for scrap prices, but there is still a lot of uncertainty, especially with the Turkish elections set for Sunday, according to scrap market sources.

“The mood is generally bearish, but I think the bears are a little too far out over their skis with the prognostications for the degree of the drop,” one source told SMU.  

He noted that export pricing is stable for now, but that could change after the runoff election in Turkey to be held on May 28, depending on what happens with the Lira.  

A second source agreed with the uncertainty. “Things still look weak for the US market. Not sure how much weaker yet,” he said.

The first source noted that if export pricing stays stable, “the current export shred discount to May domestic prices is maybe $20-40 on a shipping point basis depending on the deal.”

However, he said that doesn’t take into account the challenge for exporters of getting enough railcars to ship large tonnages to domestic mills.

A third source said there are a lot of headwinds for scrap prices heading into June, including good inbound scrap flows, lower domestic demand, and the weak/fragile export market.

“Prices will vary depending on region and level of last sales,” the third source commented.

Regarding prime scrap prices, an overwhelming majority of respondents to SMU’s most recent market survey saw tags tilting downward next month. 72% reported they thought prime scrap tags would fall in June, with only 4% believing they would rise, and the remainder seeing prices sideways.

SMU’s scrap pricing for May was:

• Busheling at $490-530 per gross ton, averaging $510, down $25 from the previous month.

• Shredded at $440-470 per gross ton, averaging $455, decreasing $30 from the previous month.

• HMS at $320-350 per gross ton, averaging $335, falling $50 from the previous month.

Across the board, though, market participants are bracing for another month of sliding prices.

“So bottom line is that we will likely see another down market in June, but depending on the degree it will likely be the beginning of a bottom, or at least more stable pricing come July,” the first source said.

By Ethan Bernard, ethan@steelmarketupdate.com