Prime Scrap Trades Down $20/GT in October

“After Cleveland-Cliffs bought busheling last week basically sideways, the U.S. mills stubbornly waited a week before deciding to take prime scrap down $20/GT,” said one SMU source. “They did not want to pay any more for obsolescent grades either, despite an increasing export market and slowing inbound volumes into domestic yards. I would expect dealers, in general, to sell less to mills in October since they know the mills basically got off cheap. This will definitely be the bottom of the market.”

October prices reported in the Detroit market include: busheling/#1 bundles, $575/GT; shredded, $455/GT; P&S, $450; and #1 HMS, $415. 

Added a dealer in the Northeast: “Some deals are getting done at the down $20 for primes and sideways for obsoletes, but there are also sales at positive numbers for obsoletes and some prime deals that have been sideways. I don’t sense trading is very heavy.”

He also predicts September and the early-October deals will be the bottom for the year. “The market is about to move higher in a more meaningful way. Export has strengthened a bit and will continue to move up. I’m not sure how much higher it will go – I doubt we will see a repeat of Q42020 and Q12021 – but it will be a seasonally stronger trade.”

CRU Senior Analyst Ryan McKinley noted that mill maintenance outages depressed demand in October, similar to the situation in October 2019. This offset the slowdown of inbound obsolete flows into dealer yards in some regions, resulting in sideways pricing for both shredded scrap and cut grades. On top of that, he said, there hasn’t been a lot of movement in the export market in terms of pricing.

Meanwhile, prime grades continue on a path towards a more normalized spread over obsolete grades as falling pig iron prices created a drag on prime grade pricing. “The two prices are drawing closer together again, and we now see some potential upside for pig iron in the coming months,” McKinley said.

Like other sources, McKinley agrees scrap prices will find support over the next three months. “There is a seasonal slowdown in late Q4 and early Q1 of obsolete flows, and it doesn’t appear market tightness for prime scrap is going to be alleviated any time soon,” he said. “With supply harder to come by, mills will have to raise prices to secure enough material to fill their melt programs in the coming months, although I think this upside pressure will end sometime around February.”

Pig Iron Market

The pig iron markets have been quiet this week, reported one market contact. U.S. mills are waiting a while before restocking. China is on holiday and needs to digest the large tonnages they purchased from Brazil and CIS over the last month. The price of pig iron should rise from here given that the overhang in the CIS has been relieved. There will not be as much generated in those countries for the next several months, he said.

By Tim Triplett, Tim@SteelMarketUpdate.com