Winter weather conditions, the return of export activity and a shortage of No1 busheling supplies are all working to renew optimism in the United States' ferrous scrap market.
“People think next month could be up as we are facing a second week of no flow due to weather. Nothing is coming in,” a Midwest shredder source said.
Winter is wreaking havoc throughout the country, even in states like Texas that generally have milder weather. “There is snow all over Texas. Houston looks like Colorado,” an Alabama shredding source said.
Steel mills in Texas have been impacted as a result, with one mill in Texas advising customers that it was halting steel shipments on Monday February 15 while a different mill decided to stop melting due to inflated power costs brought about by an overburdened energy grid in the state.
A 100-vehicle pile-up in Texas that made national headlines also coaxed scrap drivers off the road. “After the wreck, dealers are thinking twice about hauling in this weather. No traffic [on Friday] in the yard,” a Texas-area shredder said on February 12.
In addition, export activity from the US East Coast has resumed, with committed tons draining scrap from the domestic market while selling prices have strengthened.
While the flow of secondary grades like No1 heavy melt and shredded scrap are being choked off due to winter weather, No1 busheling supply is waning due to disruptions at automotive plants. Both are raising hopes for more strength in the market than originally expected in March.
The dynamics of winter, export orders and pressure on busheling have sparked mixed reactions on the direction that prime scrap prices will take in March, with some indicating they will be unchanged while others see prices moving higher.
“Prime scrap could move higher. A higher price [will] not draw out more prime, but it will protect tons you have,” according to a Michigan recycler, who thinks the price could increase.
“Prime [scrap] may hold its own and stay unchanged. The spread between busheling and shredded scrap has to shrink, so secondary grades [shredded, No1 heavy melt] look ripe to increase as much as $30 per [gross] ton. Mills are relying on shredded scrap and adding pig iron to reduce cost,” a southern recycler source said.
The spread between busheling and shredded scrap is as wide as $115 per ton in one area.
Adding to the supply pressure, many shredders ran inventory as low as possible at the end of January, knowing that February would turn downward.
The shredder feed assessment dropped in the Southeast and Midwest due to shredding operations lowering their scale prices in line with the drop in shredded scrap prices in the February trade. In contrast, shredder feed prices rose in the Ohio Valley to draw material out in the dead of winter.
Fastmarkets’ price assessment for steel scrap shredder feed, fob Midwest declined by 3.48% to $191.45 per ton on February 16 from $198.36 per ton the previous week. Similarly, the assessment for steel scrap shredder feed, fob Southeast fell by 0.91% to $165.96 per ton from $167.49 per ton in the same comparison.
Fastmarkets’ assessment for steel scrap shredder feed, fob Ohio Valley, meanwhile, increased by 1.13% to $175.43 per ton on Tuesday from $173.47 per ton on February 8.