Scrap Prices Moving Higher

It was only a few weeks ago that many within the ferrous scrap community felt when the negotiations were over for the month of March and the smoke cleared scrap prices would be essentially unchanged from February. That was then, this is now.

One of the larger players in the market told us earlier today, “There has been business transacted in the Midwest markets at up $10/gross ton in the Chicago area.  However, that market was lagging the NE and SE markets by the $10-15/gt so it’s not yet clear whether they’ll move higher as well.  Nothing to report on transactions in this region.  The lingering question remains what happens with the East Coast export tons.  Those volumes have been augmenting the shortage of domestic obsolete scrap.  If that material stays home, the up $10 will likely stick.  Otherwise, the market could continue to firm into April given current demand dynamics.  As we’ve discussed, I get the sense that a decent share of the idled BOF production has been captured by the EAFs which is driving demand for scrap.”

A dealer in the Ohio Valley told us that he was, “Seeing a real swing in momentum from buyer to seller.  Domestic mkt up $10-20gt. Turkish prices moving up to almost +$20mt with HMS prices nearing $200/cfr Turkey and shred at $205.  Primarily due to better demand and a delay in Chinese billet deliveries. [I am] seeing stronger demand from SDI and Nucor specifically.  There is tight supply and with stronger export prices mills had no choice but to raise prices. As we near the end of the buying cycle momentum is clearly on seller’s side and I feel this should carry over to April.” 

And from the east coast we heard from one of our sources who told us:

“Ferrous trading has started and the market looks to be $10-$15 higher than it was in February depending on the region.  That is despite some mills initially entering the market offering to pay sideways prices, a move that did not gain much traction.  

That is not unusual for March, which is a month when the market is often higher because mills have worked down scrap inventories that had been replenished in January, and inflows into yards and the corresponding outbound shipments have slowed because of the season and weather.  This year, the weather has not been terrible for the most part, but we are contending with prices, which other than for one year in the past 12 or so (that being 2009), have not been as low as they are at their current levels.  These price levels have disincentivised many scrap peddlers from going out to collect scrap.  The activity is just not financially rewarding enough today for many of them.

On top of that we are seeing better demand in Canada, which is keeping busheling scrap that has found its way south for many previous months on the north side of the border.  And most importantly, export demand has improved thanks to low Turkish scrap inventories, rising semi-finished prices globally, and lack of enough available semi-finished product.  

Two other factors worth mentioning that are and will continue to impact prices.  One is the trade cases which are going to continue to slow imports into the US.  And the other is the closing of blast furnace capacity and the integrated mills backing out of the hot band spot market, leaving opportunity for the more flexible mini-mills.

Together, all of these factors are at a minimum stabilizing scrap prices and seemingly putting a floor underneath them which should last for some time going forward.

We will see how trading wraps up this week.  My guess is that the mills will not get everything they want to buy, and there is likely further upside next month.”   

Steel buyers are well aware of the relationship between ferrous scrap pricing and that of flat rolled steel. The rise in scrap prices provides ammunition for the domestic steel mills to collect higher steel prices. Scrap is up this week and we are already seeing a number of the mills asking for another $30 per ton for their steel.