War Triggers Record Jump in Scrap Prices in March

The interruption in exports of slabs, pig iron and hot-briquetted iron from Russia and Ukraine has created a short supply shock that is sending buyers to Turkish mills in droves, said one dealer in the Northeast. U.S. shredded scrap prices have tracked with the delivered shred price to Turkey since the market bottomed in fall 2020. This month was no different, except that the $125/GT increase in the domestic trade still trailed an increase in the Turkish shred price over the last month of $150/MT or more.

The U.S. prime scrap market rose a whopping $175/GT from February levels mainly due to the shortfall of available pig iron, sources said. “The U.S. was getting 60% of their pig iron imports from Russia and Ukraine. We are talking about hundreds of thousands of tons per month of pig iron that is now effectively gone. The latest pig iron prices delivered to New Orleans are around $870 per ton or more. So, we think prime scrap has further upside from the March level,” the dealer said.

Turkish electric arc furnace mills are scrambling to buy additional and unplanned tons of scrap to fill the surge in orders, which only adds to the upward pressure on global prices. “I don’t know how much higher the Turkish scrap prices will go – the latest deals for 80/20 CIF Turkey are north of $650/MT – but their new scrap demand levels will continue for some time,” one dealer said.

Factor in the new EAF capacity ramping up in the U.S. this year – including SDI’s new mill in Sinton, Texas, and NorthStar BlueScope’s expansion in Delta, Ohio – and scrap prices have nowhere to go but up for some time. “Even if the Russia-Ukraine situation returns to some semblance of normal, which seems impossible at this point, by the time that happens we are going to run into U.S. mills’ need to increase their raw materials supply as expansions come online this summer,” noted one exec.

Based on comments from SMU sources, scrap prices for March have settled around $560/GT for HMS, $570/GT for P&S, $600/GT for shredded and $700/GT for prime grades, plus or minus $20, depending on the region.  

‘Not Enough Pig Iron to Go Around’

Turkish mills have no good options for replacing the low-phosphorous pig iron usually supplied with a short one-week transit time from Ukraine and Russia, one trader told SMU. Instead they are forced to try buying lower-quality, high-phos pig iron from Brazil and wait five to six weeks for delivery.

“Without a reliable source of low-phos pig iron, the thin-slab casting mills in the U.S. need additional busheling, DRI/HBI or both to replace pig iron previously sourced from across the Atlantic. There is not enough to go around,” said another scrap exec. 

He reported the sale of high-phos pig iron from South Brazil for $750/MT CFR for May shipment, while a small low-phos cargo was traded from Northern Brazil at about $860-70/MT. 

“Needless to say, these prices are $200/MT higher than two weeks ago, and you can expect prices to rise even further. May shipments from South Brazil means they won’t arrive at upriver mills until July.”

By Tim Triplett, Tim@SteelMarketUpdate.com