Hoffman: Markets sideways or fractionally up in some regions?

Written by Philip Hoffman

This week started off quietly with mills not wanting to give up of the gains they made in March. As of Tuesday morning, it’s crickets with the exception of a rumor that a major mid-west mill sent out cancellation orders to their suppliers. This mill’s move does not bode well for April prices, but it’s not clear that this sentiment will resonate in other regions.

Dealers in the Gulf Coast, East Coast, West Coast and Southeast expect markets to be at least sideways because of the $15 rise in the Turkish and Asian Export markets, which will they are projecting will have a knock-on effect in their respective domestic regions.

One large Texas yard said, “Turkish export went up $15 throughout March, and the Indians are hungry for scrap now, so I don’t see any way that domestic will go down. I have numerous domestic mills looking to buy this month so perhaps it may even be up on some grades.”

Another Texas dealer said, “For the first time I sold all my HMS in containers this month, and unless the domestic mills move up, I’ll do the same thing again in April. I can load containers and more dealers in the area are learning to do the same.”

On the West Coast, Taiwan buyers are giving their usual “power shortage” speech, which is when electricity prices in Taiwan spike during the summer months and sometimes cause brown outs. That in turn leads to reduced capacity utilization rates in the country. However, it is a tired argument that gets used too often. Despite the mills’ best attempts to use this argument each year in April/May, prices to Taiwan often stay up in the summer because demand and finished product price dominate their buying decisions over power costs.

As of today, export prices on the USWC have come up from a low of $335 FAS to a high of $345. However, two dealers turned down offers of $345 FAS as one stated, “There’s another $5 out there next week.” The other stated, “Mexico is back in, and containers at $345 is not competitive.” In the meantime, one Vietnamese mill is now pushing to buy at $345 FAS when last week they weren’t interested at that level.

If the U.S. Midwest mill did cancel orders, they clearly think that the market is going down in their region, but in the coastal regions any talk of a down market is going to force local dealers to sell more into a rising export market. As a result, it’s unlikely domestic mills will get away with pushing the market any lower.

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