Scrap Prices North America

Ferrous Scrap Prices Poised for Big Jump in March

October 29, 2020

Ferrous scrap prices are expected to rise anywhere from $40-70/GT in March after declines in February, lending further support to higher finished steel prices.

Scrap prices are likely rise in March by at least as much as they fell in February, said CRU Senior Analyst Ryan McKinley. “The cold snap over the last few weeks affected almost the entire continental United States, with 70% of its landmass covered in snow. This, in conjunction with lower prices month over month, helped slow obsolete-grade scrap flows even as mill demand remains high.”

The international market continues to exert strong upside price pressure, McKinley said, with Turkish prices up over the $450 mark CFR for HMS 1/2 80:20. Much of that stems from a jump in Chinese finished steel prices following their return from the Lunar New Year Holiday, with rebar prices up this week by nearly 8% ($50+ per ton) since mid-February.

The market for prime grade scrap is also becoming unusually tight, driven by automotive production issues resulting from a global shortage of semiconductors. “That means mills will have to compete more intensely than last month to secure sufficient volumes of primes,” McKinley said. “I suspect mills will use as much obsolete grade supply as possible in their melts to help offset this, but there are technical limitations to doing this for many mills.”

One dealer in the Northeast said March prices will rise for three main reasons: reduced inbound scrap flows due to inclement winter weather; export prices that have risen by $70/GT; and steady scrap demand as the EAF minimills continue to take market share from the integrated mills. He said increases for both prime and obsolete grades could rise as high as $50-70/GT, higher than previously expected. “I think we will see the return of regional discrepancies in sale prices in March based on proximity to the export docks and differences in weather,” he added.

Another scrap executive in the East expects March prices to jump by $40-50/GT across the board, essentially keeping pace with the export increases from the time of the domestic February buy. He said the latest export sale for 80/20 delivered Turkey is $450 per ton out of Russia, following a $445 per ton Baltic sale within the last day or so and an ex-U.S. sale at $435 per ton last weekend. Scrap ex-U.S. docks reached a low of around $390-395 CIF Turkey in early February and has risen $50 or so since. Rebar offers are now around $640 FOB Turkey, making for a healthy scrap-rebar spread of around $190, he said.

“U.S. scrap yard inventories are lower across the board due to weather disruptions and the February price drop. Domestic shredders have begun to raise prices in bumps from $20 to $40. Railcar movements are a little disrupted causing deliveries to slow out of yards. Bottom line, I think obsoletes will get back most if not all of what they gave up from January into February and primes will extend their run well into the mid-$500 range,” he said.

There are other factors at play, commented another source. For one, the Chinese markets for ferrous scrap are starting to open up. “Right now, smaller shipments are being arranged to test the new Chinese specifications and customs clearance. If the Chinese decide to start buying bulk cargoes of scrap, this could jolt the already bullish international markets to new highs.”

The cost of transportation has jumped this year, he added, with the rates to ship containers to the Far East almost doubling. The rate for bulk cargoes from the East Coast to Turkey are up $10-12/MT. Dealers have warned there is a railcar shortage and trucking rates have climbed in response. Also, the Illinois River is iced over preventing barges going south from Chicago to feed mills in Arkansas.

“I don’t think prices will subside in April despite the usual warming. It seems steel demand will continue strong and the demand for scrap by the mills will be fierce. The export market shows no signs of weakening as a number of overseas mills are clamoring for scrap cargoes.”

Pig Iron Market

One SMU source reported the following on pig iron prices: “The pig iron market had calmed down in early February, with sales of both Russian and Brazilian material concluded at the $500-510/MT New Orleans range. This was a steep drop from the $560-570/MT buys of Chinese re-sold cargoes in January. Just in the last few days, however, U.S. mills have bought a Russian cargo at $550/MT CFR and a Southern Brazilian cargo at approximately $540/MT CFR. So, this market has sprung back to life, even without the Chinese demand we saw in H2 2020.”

By Tim Triplett, Tim@SteelMarketUpdate.com