Scrap Prices for September Looking Sideways to Down $20

Earlier this month the consensus of opinion among our ferrous scrap sources was that we had seen the bottom for scrap prices and, more than likely, prices would rise as we entered September negotiations. However, that was then, this is now. As we enter the negotiation period for September ferrous scrap buys by the domestic mills, we know the mills are going to try to push buying prices lower. The market opinion at the moment is for scrap prices to trade sideways to down $20. We could see larger drops depending on the region and the product.

SMU learned from one of our sources, “The Chinese billet prices are dropping every day, down $34mt from last week.  70,000mts booked this morning at $296/mt CFR.  Scrap will have to adjust and it is – latest sale to Turkey of HMS is down $5/mt and most expect large drops coming including me.  This is affecting the Sept US domestic outlook as most now believe Sept will be sideways at best.  Previously consensus was [for] stronger prices in Sept.”

Another scrap source, when told of the 70,000 tons of Chinese billet deal, told us, “The question is when will the billet arrive. Buying 70,000 tons of billet is like buying two cargos of scrap.” He went on to say, “Ten to fifteen cargos of scrap is the normal monthly buying pattern for the Turkish mills. Globally they buy about 500,000 to 600,000 metric tons per month.”

The fear is if exporters of U.S. ferrous scrap see their prices pushed lower, and some are saying the new numbers made need to be $20 to $40 per ton lower, then they will move scrap into the domestic markets pushing prices lower on the East Coast, Mid-Atlantic and Ohio Valley.

From an East Coast dealer we learned that they had recently made a sale of shredded scrap into the Ohio Valley for September delivery at sideways numbers (same as August sales). This same dealer admitted that they had also sold some scrap at down $10. He told us, “If the mills try to push the market down they are going to meet resistance.”  He also told us he wished he had sold more at the sideways number and admitted that demand for scrap on the East Coast is “pretty slim.”

Out of the South we heard from one of our sources, “The billet price into SE Asia is now $290 MT delivered.  Yes, prices may need to adjust, but the jury is still out downward movements in the US.  Busheling may be available, but obsolete grades may be harder to buy at down money.”

Pig iron prices have dropped to $245 per metric ton CFR New Orleans.

The September negotiations should conclude next week as mill buyers do not want to go into the Labor Day Weekend holiday knowing that they have to buy for September delivery when they return on the 8th of September.