Prime Scrap Prices See Big Drop in September

“The HMS range was very wide reflecting tight supply in the Ohio Valley and lower numbers in export-influenced regions,” said one dealer in the Northeast. “Exporters are paying as low as $350/GT for 80/20, while some domestic mills are paying as much as $430/GT.”

Hurricane Ida caused some disruptions on the river system, making less shredded scrap available in the Chicago district and down South, giving obsolete prices a boost. Prime grades were weaker due to falling pig iron prices, he noted. 

The U.S. market is still consuming a great amount of scrap, said another source. “It’s hard to predict what prime scrap will do going forward, but chances are it will stay sideways or move down slightly. Obsoletes, on the other hand, will trade sideways as some later shredded sales have already shown firmness. October should be the bottom of the scrap market in the U.S. Things will firm up on a seasonal basis thereafter,” he predicted.   

Of course, export demand will be a factor, he said. “The prices for shipment to Turkey have continued to drop gradually. Many thought the line could be held at $450 per metric tonne (MT) CFR for HMS 80/20, but that threshold was breached, and prices are as low as $435/MT CFR. Most think this descent cannot last much longer. North American exporters have not sold below $445/MT, but it remains to be seen if that level can be maintained.”

“Looking forward, we think export is near the bottom,” commented another scrap exec. “Obsolete scrap flows have weakened, and dealers and exporters are not replacing scrap at the rate they have been selling it for the last few months. Asian steel markets are strengthening a little, which we expect to continue. That could help improve the competitiveness of Turkish rebar and billet into Asia.” 

He continued: “Accordingly, we think the October obsolete trade will be basically sideways from September, but could be very slightly up or down depending on demand in light of upcoming U.S. mill outages. We see some continued weakness in prime grades in October as pig iron is still trading at a discount to prime scrap, though the drop in October should not be as great as we saw in September.”     

The pig iron markets have been under pressure the past month but show signs of bottoming, added one dealer. “China has re-entered the market at prices of about $540/MT CFR. This was evident earlier this month when they bought 105,000 metric tonnes from S. Brazil at $480/MT FOB Brazil with a freight of $60. There was also a sale for CIS and/or Russia at the same CFR level. However, on Friday, U.S.-based mills concluded a purchase from S. Brazil at $496/MT FOB, which increased the CFR level at New Orleans by approximately $8/MT.

“So from here, the direction of the pig iron market will depend upon what the Russian and Ukrainian producers do and the appetite of Chinese consumers,” he concluded.

By Tim Triplett, Tim@SteelMarketUpdate.com