Scrap Sources Expect Sideways on Primes & Down Slightly on Obsolete Grades

Our scrap sources are a little less optimistic today about June scrap price negotiations than they were a couple of short weeks ago. Those pesky Chinese are once again mucking up the waters with their billet offers to Turkey (billet can be used in place of scrap and cost less to convert to long products like rebar).

Here is what we heard from one of our sources on the east coast which is where most of the ferrous scrap moves from the U.S. to Turkey:

“The tenor of the market has turned more negative, and it appears June will be lower based on lower export prices and falling Chinese billet offers to Turkey.  Shred is the weakest grade, by far I would say.  Spring flows have lifted supply of shred well above where it’s been.  The availability of other grades from our vantage point is thin, in particular prime scrap.

It’s a fluid situation, however.  There have not been any US trades that I am aware of in the last several weeks.  US domestic demand is still good.  And the scrap supply chain is not very deep.  With that said, most dealers would concede flows are better and after three solid up months it’s reasonable for the market to retreat in June.  How much that retreat is depends on US demand and ultimately what Turkish and other foreign demand for US scrap will be in light of apparent billet availability.”

While one of the large national scrap suppliers told us, “There is certainly negative sentiment emerging on obsolete scrap heading into June.  Primarily driven by weakness in global ore/scrap prices and their potential impact on US exports.  Prime scrap demand however remains firm and I suspect will not move lower with obsolete grades.  Overall, domestic scrap demand is holding steady while supplies have improved.”

A mid-Atlantic based scrap company was a little more skeptical, “I think there potential for market to drop more than $20 especially towards the coast.  All [everyone is] still waiting for next rounds of sales into Turkey.   Expectation today $290-300 CFR.” The previous 80/20 sales were done in the $330 to $335 per metric ton range.

We heard late this afternoon that U.S. offers to sell 80/20 mix to Turkey were made at $310-$320 per metric ton but no deals were done.

Scrap is a regional market and what happens on the east coast with exports could slip into some of the other regions or it may not. The biggest issue would be if there are no export orders and collections begin to improve, then the dealers will have to move the scrap inland to the domestic mills probably at lower prices.

We will watch developments carefully as we move into the month of June.