Scrap Moving Toward Down $30-$40 Per Gross Ton

Written by John Packard

Steel Market Update (SMU) has been speaking with a number of our ferrous scrap sources over the past few days to get a better feeling as to where scrap will trade for the month of October. Early reports are that Detroit (which tends to lead the charge most months) saw cut/obsolete grades down $30 per gross ton while prime grades like #1 busheling dropped by $40 per gross ton. Ferrous scrap prices are under pressure across the country, but as of late Wednesday were still in negotiation with most dealers.

One of our scrap sources provided some insights into the status of negotiations and where they felt from their East Coast perch scrap prices would ultimately settle for the month of October:

“As a preface, this could change in the next 24 hours, but for now…

There is a lot of talk right now. Midwest mills are offering to buy at down $30 for obsolete grades and $40 for primes, but those are just offers to buy and I have not heard many dealers conceding to those numbers and confirming deals yet. Supply of obsolete grades has improved over the last two months, so while supply is outstripping demand a bit at this point, this is as much a seasonal move we have seen in many previous Octobers.  Scrap dealers in general are not overly bearish and know that material inflows will dry up in the next three to four weeks.

The seasonal move is being exacerbated by the larger domestic buyers trying to push the market lower by talking about lower prices and selling scrap to each other at lower prices as a way to prove out a new market level.  It does not make a ton of sense to me how after a 60-day DRI plant outage and longer than normal auto plant shutdowns, both in a year when the prime to obsolete spread has been surprisingly wide, why prime prices should fall over 10 percent month-over-month.

My assessment right now is that mills want to buy and dealers will sell less than normal volumes at down money.  Deals will get done at down $20-$30 for obsoletes and maybe for primes, too. Export is certainly down into the $290s cif for 80/20 to Turkey.  But I sense we are really close to, if not at, the bottom there. Container scrap demand is decent and will help to put a floor on export prices.”

A Midwest dealer told us there is an “overhang” of shredded scrap from September. Export prices are dropping by $50+ per metric ton. There is also a decrease in demand at the domestic mills due to fourth-quarter shutdowns and “to a lesser extent slowing order books.” This dealer is seeing prices settling at down $30 on HMS and Shred and $40 on busheling. He went on to say that the expectation would be for the market to plateau after the drop in prices this month. If prices do settle down $30-$40, there will be a slowdown in scrap collections.

Written by John Packard,

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