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Scrap market tempers Dec. price expectations

Keywords: Tags  scrap, Midwest, ferrous, steel mills, sean davidson

NEW YORK — Earlier expectations of a $20- to $40-per-ton run-up in ferrous scrap prices in December have largely subsided, with most market participants now forecasting a "strong sideways" market and a few even predicting slight downward pressure if demand from steel mills and the export market slips.

Although many had said in mid-November that prices could rise as much as $40 per gross ton next month based on seasonal trends, most Midwest sources are now offering a consensus view of a sideways-to-up-$10 market.

Only one Midwest supplier said he still expects the same $20 to $40 increase, even as some market players predicted prices could lose as much as $20 compared with November.

"December should be even, with slight downward bias if export doesn’t kick in," one buyer said.

For the most part, however, buyers and sellers have pegged the December scrap market to trend sideways—although most conceded it was too early to say for sure.

"It is too soon to tell. Business is slow so there is not a lot of strength to the market," a second buyer said, nonetheless speculating that prices would move "sideways to up slightly."

Several suppliers said that a seasonal drop in scrap supply during the winter months has historically led to higher prices in December or January.

At the same time, any effort to push prices down will meet fierce resistance from sellers.

"I think it will be sideways. Could be up some. I don’t expect it will be down any (because) dealers would hold tons at any sign of softness," a third mill buyer said.

A supplier source agreed that the market has little downside. "December being a short production month and less scrap available, we do not see any downward pressure on the markets. Some mills may have a reduced buy in December but this is quickly offset by the shortened month and less scrap coming in," he said.

A few suppliers cited recent price increases on certain finished steel products as another factor supporting higher December scrap prices.

However, many suppliers said they are still trying to gauge mill demand, with some noting export trade in the coming days could play a critical role in where prices settle.

"We have heard weaker, same and stronger," a second Midwest supplier said. "I don’t know what to tell you. Some mills are a little short and are looking at slightly up. Others are content to wait and see what the market does."

On the export front, U.S. bulk export prices to Turkey have dropped by $12 per tonne from the last confirmed sale after sources reported a single bulk cargo sale completed Wednesday at between $395 and $396 per tonne c.f.r. Turkey for an 80/20 mix of No. 1 and No. 2 heavy melt. The last confirmed bulk sale to Turkey off the East Coast was concluded Nov. 13 at $407 per tonne c.f.r.

Earlier this week, market sources said export prices were likely to soften after rumors emerged of a different sale off the East Coast to Turkey at around $400 per tonne (, Nov. 26).

Weaker export prices aside, some domestic suppliers nonetheless remain extremely bullish for December.

"Chicago has had a very strong appetite for cuts and all of the shredders within 250 miles can’t get enough scrap. I know we have seen a drastic slowdown at the scale as well as industrial scrap. I know most inventories are hand to mouth, both in the scrapyards as well as the mills," a third supplier said.

Outside of the Midwest, market participants in the Ohio Valley and Northeast speculated that December would trend largely sideways, with a possible $10-per-ton nudge in either direction.

Not a lot of tons are expected to trade early in the month as mills don’t want to inflate year-end inventories and scrapyards are content to hold off in hope that January will deliver stronger numbers.

Chatter of an early 30,000-ton sale in the Northeast at down-$10 has made its way through the rumor mill but the talk is unsubstantiated, according to volume buyers, including mill buyers and brokers.

There also is an expectation from some sources that December could be one of those rare two-tiered markets where a second round of prices is struck for January delivery before the year draws to a close.

"I think the January buy eventually gets pushed back to late December. Week one in December will not be the full buy and we will see more transactions as we get closer to Christmas for January programs," an Ohio broker said.

Lisa Gordon, Pittsburgh, contributed to this story.

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