PITTSBURGH The pricing
outlook for the domestic ferrous scrap market in June appears
to have weakened further as a strong U.S. dollar, sparse export
opportunities and an oversupply of scrap threaten to keep the
market under pressure, buyer and seller sources have told
A growing number of market
participants said they now expect June prices will fall by a
minimum of $20 per gross ton, with brokers at mill-owned scrap
companies said to targeting a drop of as much as $30 to $40 a
ton. That compares with a more bullish pricing outlook less
than two weeks ago, when U.S. steel mills, dealers and brokers
told AMM they were anticipating a smaller drop of
between $5 and $20 per gross ton across all grades
(AMM, May 18).
The expected decline in scrap
prices comes as steelmakers continue to face an onslaught of
imports as well as domestic oversupply, keeping steel prices
under pressure. As sheet prices fall, there is
additional motivation from producers to lower their input costs
to keep finished steel margins competitive.
"My take is there is nothing to
support the (scrap) market. I believe new steel sales are
falling at least as fast as scrap metal procurement levels this
spring, (and) with the discouraging export market, more scrap
is available to inland mills," said a Missouri-based
Additionally, while mills will
be in the market for June, many will have limited buys due to
the typical summer slowdown and planned maintenance. At the
same time, some grades are still said to be readily
"We have not been able to sell
everything we have wanted to sell over the last few months.
Prime scrap appears to be in surplus and has been for the last
few months. Heavy melting scrap and shred have not been but may
also be in excess in June," said a Midwest recycler.
Prime is especially in surplus
in Canada, the Ohio Valley and the Midwest, a second broker
said, while excess shred and cut grades are said to be
blanketing the entire Northeast.
As a result, mill-owned and
independent scrapyards across the country have been preparing
for further deterioration in prices and are said to have
lowered their buying prices at the scales.
"I lowered my scale prices by
$30 (per ton) this month and am going to cut it again. I
dont care if the material comes in or not. I am hunkering
down for the summer because I am not going to be a bank for the
steel mill," said a Southeastern shredder operator.
Sources at scrapyards said they
are scurrying to get their sales delivered to the mills by May
31, because the expectation of a softer June market means mills
have little incentive to take any lingering May material
Its still too early to
tell where June prices will settle, but buyers and scrapyards
both say they are anticipating a slow week of negotiations. "No
one will be in a hurry to settle, because the market is headed
down," said a national broker.
Meanwhile, there is little
chance that exports will pick up the slack and tighten the
market as export docks have been lowering their buy prices as
well on a lack of new orders (AMM, May 25). The strong
U.S. dollar is only working to drive what little business there
is to Europe, where the weaker currency has resulted in better