Scrap Prices Poised to Rise in December and January

Steel Market Update (SMU) has been canvassing our ferrous scrap sources to find out where the industry sees prices once the negotiations begin with the domestic steel mills. All of our sources tell SMU they expect prices to be higher, somewhere in the $10 to $30 per gross ton range, compared to the November prices.

Dealers are telling us to expect a move of +$40 to +$60 per gross ton over the next 60 days.

Supply tied to the seasonal chasing of white tail…

There are many factors behind the strength in scrap pricing. Iron ore prices have risen by more than 10 percent recently ($60 to $67/dmt). Nucor’s DRI plant is down. Pig iron is expensive and steel prices have moved up.

Scrap guru Michael Marley told SMU that there are basically three factors pushing prices. One is the export markets where exporters are getting higher numbers. Current delivered pricing to Turkey for 80/20 mix is $320 per metric ton and could soon hit $330/MT.

The second factor is the flows into the dealers’ yards, which have declined. The reason is “seasonal,” just not the seasonal that you and I think of (cold/snow). Marley put it this way: “Flows into dealers’ yards have declined. Part of this is seasonal, but not colder weather seasonal. That’ll come later this month and in January. Deer hunting season is underway in the Middle Atlantic, New England and Midwest states and in eastern Canada. That has an immediate impact this week and in the first week of December. Steel mill workers go missing now, and many scrap yard workers and scrap peddlers (the pickup truck dealers) are out chasing white-tailed deer through the woods.”

Much of the maintenance at the domestic steel mills will be completed soon. Those outages affected demand and managed to hold prices sideways for November. The outlook for steel demand is stronger for the first quarter, which should help push prices higher.

Marley is also looking at Nucor, whose DRI plant in Louisiana is down. They can make up for the shortage by buying more prime grades of scrap (like busheling).

One of our Ohio Valley dealers told SMU, “Scrap prices have been rising since mid-month as mills attempt to get ahead of the market and keep pipelines full.  U.S. scrap prices have been lagging international prices for some time. With increased domestic demand expected in January due to restocking and robust mill order books, U.S. domestic mills will need to raise prices significantly to increase scrap flows and attract tons away from export. The real question today is how much the mills will need to raise prices in December vs. January? The consensus feeling is that whatever the cost in December, it will be greater in January.  I suspect, depending on the region, December increases will be in the $20-$40/gt range.”

One of our East Coast scrap yards told us they have been having a “decent year, not a home run but solid, and we expect it to continue into 2018.”