Scrap Prices Slide on all but Prime Grades

There is a big difference between the settlement prices in the Midwest versus those on the East Coast. Ferrous scrap prices in the Chicago area saw shredded scrap drop by $30 per gross ton, cuts (obsolete scrap) was down $20 per ton while prime grades (bundles and busheling) went sideways. In the Detroit numbers shredded scrap was down $20 while plate & structural was down $10 and prime grades moved sideways. There are reports that in the South and East shredded scrap was trading $50-$60 per gross ton lower than one month ago.

One of the large Chicago area dealers told SMU earlier today, “Primes remain in demand for flat rolled producers with not much in the way of supply given July shutdowns are looming [auto shutdowns].” He went on to say, “Also, as the market gone done late last week the overhang that was sold after the original offerings were consummated got sold at deeper discounts.”

Chicago area scrap sales were said to be done at the following levels:

Heavy Melt Scrap (HMS) = $230 per gross ton

Shredded Scrap = $250 per gross ton

#1 Busheling = $280 per gross ton

We heard from another one of our scrap sources that this is how the various markets shook out for June shipments:

East:

Mill Delivered HMS – $210/GT +/-
Pier HMS – currently around $170-$190/GT (not having much luck buying at these prices)
Shred – $240/GT
Busheling – $260/GT

Midwest:

Shred – $250-$260/GT
Busheling – $270-$300/GT

South:

Shred – $250-$260/GT
Busheling – $290-$310/GT

Perhaps the biggest news on the scrap front is after almost a month there was a sale of 80/20 mix ferrous scrap to Turkey within the past 24 hours. Multiple sources told SMU the selling price was $235 per metric ton CFR which is $95 per metric ton lower than the last transaction back on May 4, 2016 at $330/MT CFR.

The issue is China and the cheap sales of billet the Chinese are making not only to Turkey but to Taiwan and other countries in Asia. The reports are of Chinese billet prices at less than $300 per metric ton. It takes about $80 per ton to convert scrap into billets so for scrap to be competitive it would have to be around $220 per metric ton delivered.

We also spoke with one of our pig iron sources who told SMU, “Like scrap, there has not been very much activity on the international market.  The last confirmed buy was two weeks ago at $290 MT CFR USEC/USGC from Ukraine.  The feeling is that the next buy could drop approximately $20 MT.”

A scrap source located on the East Coast told us, “With where billet to Turkey is currently being offered ($300-$325/MT cif), the most recent export sale from the US of $235/MT cif Turkey for 80/20 may be close to a bottom.  That price level is around where we started before the market got crazy back in early April. We have reduced our buying prices and have seen obsolete flows slow by around 30% from early-mid May levels.  Prime scrap continues to be very tight.  The $35-$50 spread between shred and prime is as wide as it has been in years, and July is not expected to see prime become more available.  So I would expect shred to move basically sideways or up or down a little come July depending on the region and for the shred/prime spread to stay the same, or we could see shred rise a bit as mills need to buy that grade to fill in for prime that is not available.”

So, is this adjustment in scrap pricing no more than a one month event?