Scrap Prices Expected to Increase in November

Ferrous scrap prices are expected to rise by about $20/GT in November, lending support to the increase in flat rolled prices announced by the mills last week.

“With mills seeking the price hike, they are unlikely to push scrap lower. It would make their negotiating position more difficult,” said Ryan McKinley, CRU North America analyst. He points to several other factors supporting higher scrap prices: 

• Scrap flows are slowing. Obsolete flows are down on lower scale prices, and a combination of the GM strike and Nucor’s DRI plant outage will squeeze prime supply.

• Mills are all returning from their seasonal outages.

• The export market has been active with prices from the U.S. up by about $20/t when exporting to Turkey.

• Mid-month scrap buys suggest that mill inventories may be lower than they had let on early in October.

• Snow is already threatening some regions of the U.S., which will prompt buyers to think about securing more scrap now before material gets buried in December.

One dealer in the Northeast said he also expects a $20 bump in scrap next month and a rise of $20-40/GT by the end of the year. He cited many of the same drivers: low flows into scrap dealers’ yards, high export vs. domestic scrap prices, better domestic demand as mills come off shutdowns and service centers begin to restock, and also China entering the pig iron market. “However, there is concern on the sellers’ part that underlying demand is not there and prices could fall in 60-90 days,” he added.

“We are in a short-supply-driven market. U.S. demand in November won’t be strong, but dealers here are already having to raise prices to recapture some inflows,” said another scrap executive. “Export is already higher by $30 over the last three weeks as demand from Turkey has improved. Expect November U.S. scrap to be up at least $20/GT.”

Whether the flat rolled mills manage to collect any of the $40 per ton increase they are seeking for finished steel will depend on lead times and supply, he added. “It’s hard to believe we have worked off what seems to be too much inventory in an over-supplied market, as been the case for most of this year, when the operating rate at U.S. mills really hasn’t dipped much below 78 percent. When are the mills going to realize if they want to raise prices, they need to really cut production?”

In the pig iron market, one source reported, three cargoes of Ukrainian BPI were sold to the USA recently at $310/MT CFR New Orleans.