There appears to be no downside in the upcoming domestic ferrous scrap trade in the United States, but much debate is already brewing as to the extent of the upside.
Depending on the grade and regions, participants have been speculating that the market will move sideways in a worst-case scenario, while some believe prices could increase by as much as $30 per gross ton.
“This is not a sideways market. It is up $20 across the board, if not up $30. There is a lot of dislocated scrap because of transportation issues, and many people are not long on scrap,” a seller in the Chicago market said.
Prime scrap – which includes No1 busheling and No1 bundles – appears to be the tightest grade in all areas. A busheling seller in Detroit estimated that inbound flows are off by 10-30% month on month, depending on the plant.
“Automotive prime is no longer getting generated like it is a bumper crop. I sold more than I should’ve in January, so I had to cut my February sales because I just couldn’t get the scrap,” the busheling seller said.
One broker said that the largest electric-arc furnace (EAF) steelmaker in Detroit may delay its market entry until Thursday March 5 because it had plenty of scrap and a four-day outage scheduled in March. The integrated mill in Detroit planning to idle is not buying, while the other two EAF mills are expected to make large buys.
“Export is stronger, demand is stronger and inventories are low at the mills and at dealer yards,” a seller in Detroit said.
In Alabama, more than one seller into that market believes the market could increase by $20-30 per ton because of tight supply and good order books in March, which is a longer month with extra melting days compared with February.
However, one Alabama No1 busheling source said that he expects the upside to be limited to $10-20 per ton.
“Steel prices are not firm enough for the market to warrant a $30-per-ton increase,” the busheling source said.
In the Carolinas, one seller said that, while he would like to see prices increase, based on the overhang in the February buy that does not appear likely.
“I am calling it a strong sideways, but prime scrap has the best chance for an increase because of demand for prime in other areas,” the Carolinas seller said.
In Philadelphia, one broker said that mills have no choice but to increase or risk losing the material to export, which has booked nine cargoes in less than 30 days. No1 heavy melt settled in February at $230 per ton in Philadelphia, while the export docks are now paying $210-225 per ton for the same material. Domestic always sells at a premium to export.
In Pittsburgh and Cleveland, strong appetites from at least two mills have driven improving sentiment.
“I had been in the zero to up $10 per ton camp, and now I am in the zero to up $20 per ton camp,” a Pittsburgh broker said.
A second broker said that with the strong buying that is expected in a region short of prime material, he thinks the market could be up $20-30 per ton in Pittsburgh and Cleveland.