Scrap Dealers Surprised by the Magnitude of the Drop in Scrap Pricing

Written by John Packard

Prior to the beginning of the month most scrap dealers were resigned to the fact that ferrous scrap prices would decline by $20 per gross ton and, in some remote areas, perhaps as much as $30. By the end of this past week the dust had settled and scrap prices had dropped by a minimum of $30 and in the east by as much as $40 per gross ton.

Here is how one of our ferrous scrap sources laid out the markets in the East and Ohio Vallley:

“Ferrous scrap trading has largely wrapped up for November at this point though a few mills are still filling in purchases.  The domestic market took a big step down as obsolete grades traded $30-$35/GT lower than October levels, and prime grades traded as much as $40/GT below last month.  As I have mentioned previously, the main culprit is the lack of demand for exported scrap from the US.   Exporters simply have fewer options to sell overseas due to extremely weak demand there (as a result of overproduction in China and consequent export to destinations all over the world of Chinese semi-finished and finished steel product).  The strengthening dollar is having a negative impact too.

“Many US dealers were taken by surprise with the magnitude of the drop. But there was plenty of scrap available for mills to order in October. And expectations for the next few months seem to be that we have hit a temporary stable level as flows into dealer yards will invariably slow down with shorter days, holidays, deteriorating weather, and some serious transportation limitations for trucks, rail, and barges.  No one is expecting a big bounce to a higher level, but I am also not hearing of another step lower just yet of the size we experienced in November.

The exporters do expect the price levels to get to $315/MT cif Turkey at some point soon.  They continue to lower buying prices at the piers (currently $255/GT for 80/20 on the USEC).  But we are nearly there already.  That level is likely not the longer term bottom but I am guessing it is a stabilized level over the next 60 days.  That is a somewhat risky comment in light of all the uncertainty out there, but we have fallen very far very fast over the last 60 days.  So I am prepared to put it out there with the caveat it may change.”

Over the past 60 days scrap prices have dropped by $50 to $60 per gross ton.

Here is how we are seeing prices in a number of the key markets:

In the East:

  • shred at $310/GT
  • HMS (domestic mill) – $295/GT
  • Busheling – $360/GT

In the Ohio Valley:

  • Shred – $330-$335/GT
  • HMS – $310-$315/GT
  • Busheling – $375/GT

In the Chicago Area:

  • Shred – $325
  • HMS – $315
  • Busheling – $350

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