Small Decline Forecast for April Ferrous Scrap

Ferrous scrap settled up $20 per ton in March, but demand is softening and supplies are building, leading to predictions of April scrap prices that move sideways or decrease by $5 to $10 per ton.

Outages at five mills in late March and early April will dampen scrap demand, said CRU North America Analyst Ryan McKinley. Buy programs for mills not taking outages appear similar to last month, with capacity utilization rates hanging around 83 percent. At the same time, the weather has been warm enough to keep scrap flowing, although a bit slower than average. And export prices are unchanged. “Overall, scrap appears to be shaping up at sideways to down $5-10,” McKinley said.

“We will see slightly softer demand for scrap for various reasons in April that will likely push the market lower by $10,” agreed a dealer in the North. “Several mills in the Ohio Valley have experienced poor operating circumstances over the last month, which has left them with higher than ideal inventory levels. Balancing that out is consistent and solid export demand at stable prices and still relatively weak inflows to scrap yards. Overall, looking forward, we should see scrap trade within the current band by $20-$30 until some macro dynamic changes,” he said.

Commented another dealer in the Northeast: “The broad market is pointing to a soft sideways.  Warmer weather will bring the expected increases in scrap flows, raising supply.” He described demand as “spotty” as the Ohio Valley mills reduce their April buys. On the other hand, he said, export sales will be stable through April. “We should see grades trade at various ranges from March levels primarily based on supply.” His forecast calls for prime grades to trade sideways, but cuts to decline by $10 and shredded by $20 per ton.

Consultant John Harris of Aaristic Services reports that exports are continuing at an even pace with intermediate offshore demand. Turkey is paying an average of $325/MT CFR for deep sea scrap leaving a $275 East Coast port cost. The U.S. market is holding its scrap in the $325/GT to $380/GT range for #1HMS to Bush pricing. Expect the +/- $20 monthly price range adjustments to hold through July, he predicted. “High springtime river levels make barge traffic unreliable in some areas, along with half loads on some northern region roads. This is a normal April occurrence. There are no international forces driving up the export scrap demand at this time,” he added.

Another SMU source reported that there have been at least four major cargoes traded to Turkey in the last week. The prediction is that Turkey has to continue to book more cargoes in Europe and North America. Expect export prices to hold or go up, he said. River-based mills are experiencing major problems from flooding in the Midwest that has restrained scrap barge shipments. “The market should really trade sideways, but with ‘spring cleanup’ starting to get under way, supplies of scrap will increase. There is a chance that busheling will trade sideways since pig iron shipments are slow to move upriver.”

Pig iron reportedly has been booked as high as $375/MT CFR. However, there are unconfirmed reports of cargoes from Ukraine/Russia at $368/365 MT CFR, which would make sense considering the perceived weakness in scrap prices here.

“For April, things should not change too much despite the market moving down a bit or going sideways,” he added. “It seems like the mills will need scrap going forward and the U.S. scrap dealers will supply it.”