The ferrous scrap market in the United States appears set for an upward price correction in November, with regional demand dynamics likely to play a major role in determining the extent of the price increase.
"The question right now is how much and where? It is not the worst thing for a well-funded dealer if prices stayed flat. There is no downside in the market right now, and I think there is an upside bias even in the Midwest," a seller in the Midwest said.
Following Nucor Corp's earnings call on Wednesday October 23, expectations that domestic scrap prices will rise by $20 per gross ton in November pervaded the market, to the delight of many sellers. At $217 per ton in October, the price for shredded auto scrap in Chicago falls only $47 per ton higher than a multi-year low of $160 per ton seen in November and December 2015.
"The market is certainly stronger in the South, but [the price increase] has to happen because flow is terrible. There will be no material coming [inland] from the coast. The weather isn't going to get any better, and demolition jobs are finishing not starting," the Midwest seller said.
A second seller in the Midwest agreed that domestic scrap prices are in for a much-needed correction now, with fewer mills taking outages in November, low scrap inventories at dealer yards and the mills' intent to raise hot-rolled coil prices by $40 per short ton.
"You can't go sideways on scrap and take a $40-per-ton increase on hot-rolled coil. Those prices are not going to stick. This market has a minimum upside of $20 per ton, if not more," the second Midwest seller said.
In the Ohio Valley, where demand is likely the weakest, one consumer said he would not be surprised if the market increases by $5-10 per ton in November's trade.
"Supply is slowing, and I have way more open orders. Usually I am nearly done by the end of the month and scrap owed to me has shipped, but I am owed a lot. The problem is order books are not good and my monthly requirements will be down," the consumer said. In order to conserve cash, his mill is not building inventory yet, he noted.
Shredder feed prices in the Southeast and Ohio Valley regions rose for the second consecutive week, due to some shredders caving to price increases in order to bring back scrap flows. One shredder in the Southeast and two shredders in the Ohio Valley raised shredder feed buying prices by $5-15 per ton.
Fastmarkets' price assessment for steel scrap shredder feed, fob Southeast moved to $80.44 per gross ton on Monday October 28, up from $78.91 per ton a week ago. The assessment for shredder feed, fob Ohio Valley inched up to $69.13 per ton from $68.41 per ton.
In the Midwest, auto shredders held the line on price increases. The assessment for shredder feed, fob Midwest held at $68.97 per gross ton on Monday, unchanged week on week.