More Color on Ferrous Scrap Negotiations for August

Steel Market Update (SMU) asked ferrous scrap guru Mike Marley of World Steel Dynamics how he is seeing ferrous scrap price negotiations as we enter the month of August. He reported what we have heard from our scrap sources: the market should expect higher scrap pricing in the coming month.

Here’s what Marley told us late last week and over the weekend:

“I expect prices will be up by $20 per ton. The biggest driver could be the export demand and the likely price increases that I believe the docks will post as they gather HMS and shredded for the new deals booked this week.  80/20 HMS is at an average price of about $325 in the two latest deals from the U.S. That means the docks can offer $290-295 per gross ton and be at breakeven. They probably won’t go that high, at least not to the local smaller dealers. They are (or were) quoting $240-250 per ton for export HMS, but it’s a safe bet that dealers are looking for higher prices from them now. 

“They (the exporters) have taken in most of the No. 2 heavy melt from dealers on the coast and inland areas like western Pennsylvania, New York and Maryland. That means shredders are losing the dealer feed stock that is one part of their supply stream. The coastal mills like Gerdau Sayreville, NJ, and AM’s mill in Steelton and Coatesville, PA, paid about $260 per gross ton delivered for No. 1 heavy melt. They will have to raise their ante by at least $20 per ton to get better quality No. 1 HMS.

“I also expect DJJ [David J Joseph] may have to pay more for the shredded scrap that they buy each month from the U.S. East Coast exporters and coastal shredders in Baltimore, Philadelphia and New York for the Nucor mills in the Southeast. This is mainly Tunis, NC, and Berkeley, SC, but also Darlington, SC, sometimes. The export yards have their own mega-shredders on the docks, but frequently buy from other shredders in the neighborhoods when the price is right, when they can’t get enough cheap feed stock, or as is likely in August, when the competition for feed stock becomes more intense.

“Bundles and busheling could be up, as well, but probably in the $5-10 per ton range. Auto plants and their OEMs are coming off their summer vacation/retooling hiatus, but sales have been slipping and that could trim the supply on industrial steel scrap. Many of the dealers that I speak with said they had unloaded all of the bundles and busheling they had or expected to see this month (July) because the flows were lower and the mill prices at $360-390 per ton were attractive.”

Negotiations will be under way for August delivery this week. SMU will report more on where scrap prices ultimately settle once the smoke of negotiations clears.