Scrap Prices North America

Experts Predict “Strong Sideways” for November Scrap Prices

October 29, 2020

Despite some initial concern that the ferrous scrap market would dip in November, scrap dealers anticipate a “strong sideways” price trend next month.

“Export sales have been voluminous over the last two weeks, and prices are now about $10 off the lowest levels they fell to over the last month or so,” said a dealer in the Northeast. “U.S. EAF demand is strong with their order books full and extending out, not to mention the rising HRC prices. Scrap inflows to dealer yards have slowed down from mid-September levels, which in part is seasonal and in part a response to slightly lower month-over-month prices from September to October.

“Looking forward, we expect the market to be no less then level with current prices from now through the January trade. I don’t know how much we will see prices increase—it will depend on continued domestic demand and Turkish finished orders into Asia—but in order for flows not to slow too much, prices will need to be firm.”

Momentum is moving toward the seller’s side for November sales due to stronger exports, growing domestic demand, seasonal factors and skyrocketing finished steel prices, said another dealer. “The big electric mills that are now operating at or above 85% capacity will view November scrap as the best value they will see for multiple months and try not to miss any of it. Initial expectations for November were a soft sideways, but consensus now is a strong sideways with dealers eyeing a December/January market that could be $30-40/GT higher.”

Commented another source: “Seasonally speaking, November is typically a down month. However, December and January are usually up months. Dealers in the U.S. usually sell in November what they plan to ship for the rest of the year as they try to build inventory for the winter months when prices should be higher. So, I have to believe the November pricing will be sideways unless there is some unusual event. Higher prices will follow from then on into January.”

Transportation disruptions reported in the Great Lakes region may further support November pricing, said CRU Senior Analyst Ryan McKinley, but the export market will likely be the leading indicator for pricing next month. “Export volumes and pricing have been solid, with Turkish CFR prices up roughly $7.00 per ton over the past few weeks. We are also hearing that demand for containerized shredded scrap from the U.S. East Coast is high. Meanwhile, domestic steel demand and prices are also increasing substantially. In fact, the CRU HR coil index between August and October rose at its fastest two-month pace since the index was created more than 40 years ago,” he said.

Moving forward, seasonal factors are likely to continue supporting scrap prices, at least through January. “Things could get even more interesting if China decides to partially repeal its ban on ferrous scrap imports. Domestic mills there currently pay roughly $100 per ton more than in other markets, so this naturally would be of interest for scrap exporters should this repeal occur. There’s not much in the way of downside risks for scrap in the short-term,” McKinley said.

Pig Iron Market

A Steel Market Update source reports that U.S. mills procured one cargo of Russian and one cargo of Ukrainian pig iron for December shipment at prices ranging from $369-373/MT CFR, earlier this month. This was followed by a Chinese purchase of South Brazilian pig iron at an estimated CFR China price of $385/MT. After this news, the U.S. bought a Russian/Ukrainian cargo at $377/MT CFR.

“So, although these prices are down from the high $380s in September, the bad news for American mills is that the Chinese are back in the pig iron market,” he added.