Shredded Scrap Prices Rise

With buying prices down by approximately $60 per ton over the past two months, we are seeing a lack of feedstock for shredded scrap across the country. The net result is shredded scrap prices are up $5 to $10 per gross ton compared to where they were in November in most regions east of the Rockies. Our sources are advising SMU that most of the other grades of ferrous scrap have seen their pricing moving sideways (remain the same) as the prior month.

SMU asked one of our East Coast scrap sources to provide their insights into the December scrap pricing compared to November:

“I am seeing sideways moves mainly as well.  There is indeed some tightness in shred supply everywhere in fact.  So some mills had to pay up $5-$10/GT from November.  In-flows have slowed down and the lower prices and end of the year effect have settled in.  We may get a bit of a pick up going into January on the flow but demand should pick up too.  Export remains soft but exporters did not offer much domestic shred this month, which seemed to underpin the market.  My guess on January is that there is some further upside to the market but how much depends on how much shred the exporters will offer into the domestic market.”

This source reported December prices as being as follows:

In the East:
Shred – $310/GT
HMS – $295/GT
5’ P&S – $305/GT

In the OH Valley – shred seems to be $335-$340/GT.  P&S is around the same level, maybe $5 less. Prime is around $370/GT. 

Prices into the south are the same as above.

We also communicated with Mike Marley of MetalPrices.com who told us that it is normal for dealers to hold back scrap in December in anticipation of heavier buying by the domestic mills after the New Year. Many mills try to hold down their inventories between now and the end of the calendar year.

He told us that they also see dealers who have overpaid for scrap over the past two months as prices dropped are under water and will tend to hold off selling at a loss in the hope of stronger buying in the New Year which tends to be case during most normal steel cycles.

Exports, and the lack of scrap exports, has been a major story when it comes to the monthly price negotiations. Mr. Marley shed some light on the current scrap markets as well, “Export is still not a significant factor in the domestic market, but that could change this month and next.  The East Coast exporters have been selling shredded to domestic mills, but they have some hurdles.  They must rely on the railroads or larger brokerage house to provide them with railroad gondola cars.  They don’t own many and what they have are the high-sided gons.  They use these to deliver their shredder residue to landfills.  Also, some mills won’t accept scrap shipped in high-sided gons because it’s too difficult to inspect that scrap without unloading it.   And for some, once it is unloaded, they own it.

“At this point I’m told the exporters are unwilling to drop their overseas sale prices below $300 per tonne delivered to Turkey.  That’s the 80/20 heavy melt price.  They only get a $5 per tonne premium for shredded.  So assuming they sell shredded at $305 per tonne and deducting ocean freight and stevedoring costs of $30-35 per tonne, this lowers the price of shredded on the ground at their dockside yards to $270-275.   That could make them bigger players in the domestic market this month and in January if shredded prices are at $340 per ton delivered to a mill in Ohio, for example.   All they need is enough railcars and from what some dealers are saying there are plenty available in the Northeast and Middle Atlantic areas this month.”

SMU learned that pig iron prices are now being quoted $390-$400 per metric ton, CFR, NOLA (New Orleans).