Scrap Markets Worst Seen Since 2009

Written by John Packard

Ferrous scrap prices continue to weaken due to sluggish demand at the domestic steel mills coupled with a lack of exports off the East Coast USA to Turkey.

Turkish scrap prices have tumbled over the past thirty days, down $46 per ton or nearly 20 percent compared to last month. An 80/20 HMS mix is now going for $192 per metric ton delivered to Turkey. Our sources are advising us that the exporters on the East Coast are offering to pay $125-$130 per gross ton for 80/20 delivered to the docks.

Demand, or the lack of demand, seems to be the issue the scrap companies are dealing with at this moment. One of our sources on the East Coast told us, “The issue right now is overall demand.  Scrap sales in October will be hard to come by, which could leave a bit of overhang going into November.  I have not seen it this weak in some time.  It is partly seasonal, and partly reflects the inventory situation.”  

Shredded scrap sales in the Ohio Valley were reported to be $200/GT, according to one of our Ohio Valley scrap sources. This same source told SMU that macro issues (such as the value of the dollar and the relationship between iron ore and scrap pricing), as well as decreased U.S. demand, is driving market prices down. We were told, “Market will be off a minimum of $30, maybe $50 depending on past sale levels.”

He went on to say that this scrap market is the “worst market I have seen since 2009.”

Out of the east we heard, “Scrap flows seem to continue to come, albeit at a slower pace, as dealers think the price could go lower than what the shredders and exporters are paying now.  Flows will stop when the dealers sense there is more demand than they were expecting.  I think we are going to overreact to the downside in October, I have seen it a few times in the past, mainly because of the seasonal element of the soft demand.  But I don’t expect a big bounce back like we have seen in the past.  I don’t know where the demand will come from to make that happen.”

He continued with, “Overall, we have to be near the bottom.  The larger dealers will not be able to buy scrap as we move further into the fall at the prices we anticipate paying.  I have been joking the market most likely won’t go below $0, but it seems we are getting ever closer.  We are getting to a place where it’s not that expensive or a burden to own and hold some scrap.”

We heard from one of our pig iron sources, “Pig iron has tanked to $230 metric ton CFR and the mill demand has throttled back – lower prices ahead.”

The domestic mills will begin October negotiations sometime next week and the scrap companies are expecting prices to go lower by anywhere from $20 to $50 per gross ton.

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