Ferrous Scrap Prices Drop Again in May

He believes May will mark a bottom for the scrap market, with June scrap trading sideways to slightly higher. “While demand may not roar back in June, it probably will be better than May. As we get further into the summer, demand should improve a bit more.”

Looking further out, the trend is unpredictable, he said. “The biggest problem is the general uncertainty in the domestic steel market. How much demand will there really be for steel? What will the slowdown in automotive mean? Is there any real pickup in long products? We are not seeing data points that are inspiring a lot of confidence for a robust second half of the year.”

Ryan McKinley, CRU North America analyst, said scrap prices are dropping because both obsolete and prime grades are in ample supply relative to demand. Dealer inventories remain high as peddlers and smaller suppliers worked to get as much material across the scale as possible in April sensing another price drop. Demolition activity is seasonally strong, which has increased flows of cut grades. Likewise, strong manufacturing activity has boosted the availability of prime grades. And a few mills are still working through maintenance and reducing their buy programs.

“At the same time, flooding on the Mississippi River system stranded scrap in the north,” McKinley said. “While that put downward pressure on prices there, it helped to prevent a $40/GT price drop in the South as mills that rely on barge deliveries were unable to access that supply in the North.”

Commented another scrap exec: “Scrap prices are off an average of $30-35/GT on obsolete and $40 on busheling in May. Most dealers are hoping this is the bottom, however the mills are still trashing the market for June. If demand picks up over the summer, prices should recover somewhat. Historically, the market picks up in June and July, but it’s not a given this year.”

Pig iron prices are still steady at $365/MT CFR, he reported.