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October may be déjà vu for US scrap mart

Sep 23, 2019 | 02:59 PM | New York | Mei Ling Toh

Tags  ferrous scrap, scrap prices, shredder feed

Negative sentiment continues to plague the ferrous scrap market in the United States, resulting in a somber outlook for October that has some sellers preparing for a $20-per-gross-ton drop and other buyers and sellers expecting larger discounts.

“The real question for October is can you move your tons?” a seller to Indiana mills asked, expressing concern about the impact of multiple mill outages on the market.

Mills are split on their intentions for October, with some in favor of a limited decline because "too much of a drop is not good for anyone" while others are considering a $30-40-per-ton discount next month.

"I cannot see anything more than down $20 [per ton] right now. I don't think sellers are getting so much material that they will be desperate to sell at more than down $20," an Ohio Valley seller said.

Sellers in the Midwest, Ohio Valley and Southeast are already conceding that the market will be down by $20 per ton in October ferrous scrap trade.

While some sellers appear to be standing their ground on the belief that the downside will be limited to $20 per ton, others are convinced that the market is going to be a repeat of September with declines in the $30-40-per-ton range.

"Mills are willing to drive the price of scrap down for short gains even if it causes a supply disruption," one recycler in the Carolinas said.

A national broker also believes that the market could fall by $30-40 per ton. "The year is over. Domestic demand is too weak, export is hardly existent and it is now a race to the bottom," this source said.

Suppliers in St Louis and Chicago who sell into Arkansas-Tennessee will have to find new outlets for the excess scrap in their yards since the latter region has four outages.

Chicago is not an option since there are three outages in the region next month. Additionally, downtime scheduled at mills in Alabama, Detroit and Houston will further reduce the number of mills needing scrap.

In Cleveland, sources indicated that an outage is scheduled at one mill while a second mill will be returning from an outage but will not be buying any scrap on the open market in October due to ample inventories and a lackluster order book.

In the Texas region, one seller noted rumors that one mill in the region taking an outage will not buy anything unless sellers are willing to accept a $40-per-ton drop in the price.

“I haven’t seen this happen for a long time where a mill gave a price but said they are not buying. That is what I do not want to see. But it looks like it may happen again. They protect their sales that way,” a seller in Houston said.

There have been no indications of what the remaining mills in Texas plan to do.

In addition to reduced domestic demand, sellers are contending with a nosedive in scrap export prices and a further weakening in finished steel prices and demand, with little chance of recovery through year end.

The brief recovery in finished steel products that pushed scrap prices higher in September is long gone and steel buyers are now on the sidelines waiting for the market to hit bottom.

The export sector is not helping the situation. Export prices to Turkey have fallen by more than $60 per tonne since late July.

An East Coast cargo sale to Turkey was reported on Monday September 23 at $232 per tonne for an 80:20 mix of No1 and No2 heavy melting scrap (HMS),  down from $294 per tonne on July 26.

Meanwhile, shredders in the Ohio Valley and the Southeast have started to lower prices to get ahead of the next domestic price decline. Scale prices at two Southeastern shredders and six Ohio Valley shredders fell by $10-20 per ton.

"Flows are down 20-30% from September. We are not going to finish filling our orders [by the] end of this week, and even if we get canceled next week it doesn't really matter because we aren't buying that much," an Ohio Valley processor said.

Fastmarkets assessed the price for steel scrap shredder feed, fob Ohio Valley at $85.31 per ton on Monday, down by 6.9% from $91.67 per ton on September 16; and that for shredder feed, fob Southeast fell by 3.1% to $96.32 per ton from $99.37 per ton.

Fastmarkets assessed the price for shredder feed, fob Midwest at $90.54 per ton, unchanged in the same comparison.

Auto wreckers and dealers who move large volumes in Detroit are receiving $105 per ton versus $120 per ton in Texas.

Lisa Gordon in Pittsburgh contributed to this report.


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