The United States’ ferrous scrap market appears to have peaked, with buyers and sellers concurring that there is no further upside left for prices in February, but participants were mixed on where the market will head next month.
“For this cycle, for sure it feels like the market has peaked. The only question, in my mind, is how soon does the market start to give back some of the gains from the last three months,” a midwestern mill buyer said.
Ferrous scrap prices have regained $80-90 per gross ton over the past 90 days after months of constant price declines choked off scrap supply. Even though prices have moved up significantly from October 2019 levels, many dealers felt inflows were still falling short of expectations.
When the January trade rolled around, mills unexpectedly received an overwhelming amount of offers, particularly for shredded scrap. The amount of shred one mill was offered this month was five times the volume offered in December.
This had triggered concern among sellers that the market may be weakening due to oversupply. However, many sellers believe that the amount of scrap available for sale next month will likely be less than January.
“A lot of people held back on sales in December anticipating a much higher January market, but they are now cleaned out. It stands to reason that there will not be as much scrap available in February because there are no speculative tons left,” an Ohio Valley processor said.
A midwestern processor said that there were a lot of dealers in the Midwest who cleaned out their yards in the January trade and that any unsold scrap is unlikely to make a huge impact on prices next month.
“The supply and demand balance is as close to even as it has ever been. I was able to place all my tons this month. Mills probably won’t have to stretch for material in February, but this could change depending on the weather and what happens on the river,” the midwestern processor said.
One seller in the Midwest is expecting prices to stay stable in February.
“There is still plenty of demand, and people are still shipping December orders in January. We don’t know what is going to happen with the weather, and export is still looking good,” the seller said.
However, a second Midwest seller felt that there was a chance prices could slip by $10- 20 per gross ton in February.
“Sentiments are changing. There will probably be less scrap offered in February, but we don’t know how much scrap didn’t get placed this month,” the second seller cautioned.
The Ohio Valley processor said that it was too early to make a call on February’s price direction.
“Today, the market is pretty much neutral. You can make an argument that prices may come down in February, but you can also make a strong argument why they may not,” the Ohio Valley processor said.
Recent price hikes on flat-rolled steel and on steel reinforcing bar will encourage the mills to keep pricing stable in February, but the key factor that would determine the direction of next month’s prices is the export market, the Ohio Valley processor added.
In the most recent cargo sold to Turkey on January 3, shredded scrap was priced at $306 per tonne cfr ($311 per gross ton) - $13 per gross ton higher than the $298 per gross ton paid by domestic mills for shredded auto scrap in Philadelphia this month.
“If the Turks are successful [in keeping bulk cargo prices flat] and they continue to buy cargoes out of the US, then the market could stay stable,” the Ohio Valley processor said.
Fastmarkets’ steel scrap No1 busheling, index, delivered Midwest mill settled at $296.71 per gross ton on Friday January 10, up by 11.5% from $266.15 per ton in December. The shredded scrap index increased by 11.3% to $296.47 per ton from $266.48 per ton; and the No1 heavy melt index moved up by 13.1% to $258.83 per ton from $228.88 per ton.