NEW YORK U.S. steel mills are unlikely to cancel outstanding scrap orders July 31 as market sentiment on Augusts price direction improves.
Prices for prime grades such as No. 1 busheling could come under moderate pressure, while obsolete grades could trend from sideways to up $10 per gross ton, according to an informal survey by AMM.
Many market participants noted that sentiment has improved from a week ago (amm.com, July 22), with fewer respondents this week anticipating weaker prices and more expecting a modest uptick in prices for obsolete scrap.
Around 65 percent of market buyers, sellers and traders polled across the country speculated that all scrap grades would trend sideways in August, while slightly more than 27 percent of respondents believe prices on grades such as No. 1 heavy melt and shred could increase by up to $10 per ton. Only 10 percent of respondents last week felt prices could trend higher in August.
The remaining respondents felt prices could weaken by as much as $10 per ton, citing an oversupply of busheling as the main driver.
Some Midwest mill buyers said they expect prime scrap prices to soften by $5 to $10 per ton and other grades to remain unchanged, while dealers and traders said they expect a sideways market on all grades.
"There seems to be enough material to go around. The weathers been such that there have not been a lot of power curtailments and mill order books are good ... so scrap is being consumed. That said, I believe most mills are happy with their current inventory levels and are not in a position where theyre panicking to get tons in," a mill buyer said.
Dealers said they were confident that August scrap would trade at a minimum of sideways because mills had offered no indications of canceling pending scrap deliveries July 31.
Some mill buyers confirmed that they would not cancel orders, with just one mill reportedly announcing order cancellations.
"I dont see any advantage to canceling orders early. I am not aware of anyone doing this," a second mill buyer said.
One St. Louis-area dealer said that a mill in the region had canceled orders as of the end of July 31, "even though there is no clear consensus the market will weaken."
Other market participants said cancellations were unlikely.
"There will be no cancellations in this market. It is apparent that this market has firmed minimally back to sideways," one trader said. "Several bigger mills have been pressing for shipments. The consumers waited too long to buy their scrap and shipment has come late. This was their choice. Mills firmed this market without knowing it."
Market participants said that an uptick in U.S. bulk export volumes and prices in Julywhen at least 14 bulk cargoes sold off the East and Gulf coastswould have minimal impact on domestic scrap prices in August since export tags are still lagging domestic values.
"I dont expect much impact from the export news other than to stabilize those mills that might have aspirations for lower prices," a second Midwest dealer said.
Those speculating that scrap prices could increase in August said that stronger mill order books, finished product price increases and delayed scrap shipments in July will combine to support firmer scrap prices.
"Transportation issues are supporting the market as scrap isnt getting to the consumer due to river issues and both rail car and dump equipment shortages," one dealer said.
Most market participants said they expect scrap trading to kick off next week, although one dealer in the Chicago area said there was talk that at least one mill in the region had started booking scrap at sideways prices, with others saying that some mills have already offered unchanged prices on shred.
"I have heard of at least three mills offering to buy shredded at the July numbers, with one taker," another dealer said. "I think the consensus seems to be the market will trade sideways on most grades. Demand seems to be holding, and even with some planned August outages, the need for scrap should remain stable. The wild card on pricing for August will be what the docks will be paying for heavy melt. Plus, it would appear that little shred will hit the domestic market from the big exporters."