NEW YORK Midwest ferrous scrap prices are expected to increase up to $50 per gross ton over the course of the winter, with November likely to kick-start the push for higher prices.
Market participants said seasonal tightness in scrap supplies, strong mill demand, finished steel price increases and an uptick in export prices will be the main drivers of scrap prices through the winter.
Most sources speculated that a $40- to $50-per-ton increase over the next two to three months likely will come in a minimum of two installments, with the first expected in November.
Several Midwest mill buyers estimated that scrap prices in November could rise between $10 and $20 per ton from this months levels, while suppliers were divided between speculated increases of $10 to $20 per ton and $20 to $30 per ton.
Most participants polled informally by AMM suggested that supplies of cut grades such as heavy melt and plate and structural will be far tighter than shredded and prime scrap.
Midwest suppliers said flows of scrap into their yards have been within single-digit percentage point increases or decreases from flows seen last month.
Most suppliers and a few mill buyers said that despite November being a shorter shipping month due to the Thanksgiving holiday and expected outages at a few mills, demand will be more than sufficient to support higher prices.
"(Outages) would be the mills last line of defense. Basically, the outages we have seen came in summer and fall and most of those mills are coming back. All hope on the consumer side is lost. They have no line of defense. They will say inventory, but good luck with that," a buyer for one steel producer said.
A second buyer agreed. "There are some outages, including our location for the last week of the month, but I think there will be enough demand that it will cause prices to push up some. The supply base will typically hold back tons this time of year if they think the first quarter is likely to be stronger," he said.
Although some market participants said prices could increase by as much as $30 to $50 per ton in November itself, many suppliers said they hope the big spike occurs over time and not in a single month.
"I really hope its not up a full $50 in November. Im hoping we see $20 to $25 increases in November and then go for another up in December or January," one supplier said, while others suggested that any large spike in November prices could force a correction in December as year-end accounting measures kick in.
At least one supplier, however, felt that prices should rise by at least $40 in November. "We expect overall volumes to be the same as September, which is not good. We have low on-hand inventories and ... flows are drastically reduced from August levels. Compounding the situation, dealers are anticipating higher prices in November, so margins are more compressed as the buy side has increased $10 to $20 to maintain flows," he said. "Scrap prices must come back up, hopefully, to bring supply in balance."
One trader expects Midwest prices to trend above the markets to the east. "I hear the discussion about strength in some regions, but most seems west of Pittsburgh and eastern Ohio. My sense is strong sideways in Ontario, Pittsburgh and Canton. (There is) too much scrap in the region from Toronto and Hamilton southward to Pittsburgh, west toward Mansfield," he said, adding that he doesnt expect any uptick in demand from most buyers in those regions.
Others suggested that markets in the South and Southeast also could record strengthening prices in November.
"The Mexico market has prices in the South pushing up strong. One (mill was) nervous that the market would spike $30 (per gross ton) due to south-of-the-border buys," one supplier to the region said.