March Scrap – Close to Market Bottom?

March scrap prices have settled with most areas of the country moving lower. The key Chicago area saw prices as follows:

#1 Heavy Melt = $370 to $380 with $385 average down $15 per gross ton.
Shredded scrap = $388 down $17 per gross ton.
#1 Busheling = $388-$400 with an average of $394 per gross ton down $16.

However, the market wasn’t as cut and dry as the numbers above may indicate. The early deals were done close to down $20 (with the mills asking for down $30). When mills saw they couldn’t buy enough scrap to cover their March needs, the amount of the drop shrunk with some deals being done at down $10 versus $20.

The keys to scrap continue to be: export demand off the East Coast and flows of scrap into the yards.

We heard the following from one of our scrap sources, “My sense is that we’re closer to some more stable scrap prices than we were in January.  We’ve given back about $50/GT of the $80/GT we gained from November to January, largely because of the lack of export demand.  But the exporters seemingly sold less scrap to domestic consumers in March than they did in February because they had less to sell.  

“Flows will improve into the yards as we get into April and May, but export demand may pick up a little (it should at least not get worse), and domestic demand is pretty good.  

“We are not there exactly but we are pretty close to a push between exporters wanting to sell shredded to domestic consumers and selling it to foreign consumers.  

“So the bottom line is that we may see prices fall a little more as flows improve into spring but we are close to a bottom.  There was more resistance to lower prices in March than some expected.  When we hit the bottom, I don’t expect it to bounce hard and spike up until export improves and flows tighten again like they were last fall.  We’ll get back there too but it will take some time.”