Scrap Prices Decline in September, Against Expectations

Steel Market Update sources report ferrous scrap prices declined by as much as $30 per gross ton in September, going against previous expectations that prices would remain stable or even increase. September marks the sixth consecutive month of declines since March–April’s record high prices. Prime scrap fell by $30 per gross ton from the month prior, while obsolete grades declined by as much as $20 per gross ton.

One Northeast scrap executive commented that scrap demand weakened in September due to both domestic mill outages and a slowing global market.

Many buyers reported that busheling scrap is now selling at a lesser price to shred in some regions. One source remarked that prime grades remain plentiful, and their discount to shred “has widened enough now to encourage many dealers with shredders to shred their busheling.”

SMU’s scrap price ranges for September are as follows: Busheling at $380–430 per gross ton, averaging $405. Shred at $395–415 per gross ton, averaging $405. HMS at $300–330 per gross ton, averaging $315.

“Supply is still readily available, and people are still working through inventories,” said another source. They commented that inflows are down, a potential challenge for winter stockpiling.

“Where is the bottom? We are probably not far from it, but not there just yet,” said one exec. He explained that while scrap inflows will slow in September and inventories will decline, that may not be enough to stabilize the market. “I don’t expect the slowing flows to be enough to overcome the reduced demand from mainly overseas in the coming weeks and months to give us a bounce that we have been looking for since the market began falling back in the spring. So the biggest drops are already done, but the pain is not over just yet.”

Regarding conditions outside of the US, sources report that scrap export pricing had increased in mid-August in response to tight European supply. As that market now loosens alongside a weakening Euro, exporters are selling larger volumes at cheaper prices into an already weakening Turkish market. One broker commented: “Domestic Turkish demand is weak as is overseas demand. This is in conjunction with a 50% increase in electric costs for Turkish mills from Sept. 1st with another massive electric cost increase expected around Nov. 1st. With Turkish mills reportedly running at around 50% capacity, it’s not hard to see the headwinds that scrap faces today and in the coming month or two until supply really gets more constrained moving into the winter.”

We will report on preliminary October scrap figures around the last week of this month.

PSA: You can chart out scrap prices as far back as 2007 using SMU’s interactive pricing tool.

By Brett Linton, Brett@SteelMarketUpdate.com