Ferrous scrap prices in the United States are poised for an upward correction in August but it remains unclear whether it will be limited to $20 per gross ton or if more upside is in store for some sellers.
Most buyers and sellers are already exhibiting a marked difference in their expectations on the amount of the price increase, which will be the first since March.
Mills are preparing for a $20-per-ton upswing but many sellers feel that this amount is not enough to restart scrap flows, which have slowed to a trickle following four consecutive months of scrap price declines.
“Flows have gotten worse and worse. Peddler scrap has pretty much stopped because of [low] pricing, the heat and clean-up season being delayed by the rain,” a seller in the Midwest said.
An Ohio Valley shredder source also expects a similar drop in inbound scrap flows. “Our shredder has not raised prices and our flow has completely dried up. Suppliers know the market is up and are holding material,” this source said.
A Midwestern processor noted that prices will need to increase by $30-40 per ton before flows improve.
“With the [direct-reduced iron] plant going down and four major mills coming up short on their July buy, I think the market will need to be up strong because no one is sitting on a big inventory right now,” this processor said, referring to the 60-day outage slated to begin in August at Nucor Corp's Louisiana DRI plant.
When the DRI plant had unexpected downtime in the first quarter, the producer needed to supplement with 40,000 tons of busheling for each week of the outage. The upcoming planned outage has allowed the producer to stockpile ahead of time and it will not be pressured for material.
But a mill buyer in the Midwest, who has not experienced a drop in scrap offers, feels that the chances of scrap prices gaining $30-40 per ton in August is “slim to none.”
A second seller in the Midwest also indicated that a $20-per-ton correction is more likely for August despite speculation that prices could move up by $30-40 per ton. “Up $40 is unrealistic at this point even though demand in Chicago will be better in August than in July,” he said.
In the Ohio Valley, the market is showing decent strength. Cleveland mills are not running full out but are expected to buy more scrap than in August. Two mills are expected to increase their tonnages by 50%.
In Pittsburgh, mills are also expected to enter the market with decent buys and consume more scrap than in July.
“I think a $20-a-ton increase is in the bag but I am not so sure that $30 a ton is reality,” a seller into the Pittsburgh market said.
One Southern mill source pointed out that the South could be up a maximum of $20 per ton because prices there have held up better than other regions over past few months, while the Midwest and Ohio Valley are more likely to increase by $30 per ton.
“The Northern markets have catch up to do and will increase more than the South,” the Southern mill source said.
An Ohio Valley processor agreed with this view, adding that the markets that dropped by $10 per ton in July – Cleveland, Detroit, Pittsburgh and, to some extent, Chicago – will likely recoup their losses on top of the August price gains.
“The attitudes of sellers are much more conservative than a month ago because July inbound [flows] were pretty poor due to the extremely hot weather. A large broker has already started inquiring about tons, so I will let them make the first move,” this processor said.
Despite a consensus that the ferrous scrap market will increase in mills' August buying program, shredders are showing discipline by holding the line on shredder feed buying prices as long as possible.
One shredder source said that his company is quietly paying $10 per ton more to large suppliers to get some material in but plans to hold off on moving prices higher for everyone until the last minute.
“We are making some spot deals for shred feed but we will wait and see where prices land and then we will react,” this source said, adding that he sees the imminent run-up in prices having some staying power. “People really need scrap now that tons are getting booked at the higher prices on new steel. I see a 60-90 day rally.”
After increasing for two consecutive weeks, Fastmarkets' price assessment for steel scrap shredder feed, fob Midwest, held at $99.15 per ton on Monday July 29.
Likewise, the price for steel scrap shredder feed, fob Ohio Valley, was unchanged at $96.67 per ton on July 29.
In the Southeast, one shredder raised its scale price by $15 net ton, which pushed the assessment for steel scrap shredder feed, fob Southeast, up by 1.4% to $113.83 per gross ton from $112.31 per ton previously.
Lisa Gordon in Pittsburgh contributed to this report.