Higher tags expected for February scrap settle

Here are several regional viewpoints from the trade:

In the Northern Ohio and Western Pennsylvania district, prices are poised to be up $30/gt. 

If prices increase this much, busheling price could exceed $430/gt, with shredded only $10/gt less in the Cleveland/Canton, Ohio, area. 

There is a lack of flow in this area. The dealers are behind on their January orders and mills there need the shipments. 

Northeast

A brief call to exporters in the Northeast resulted in a prediction of up $30-50/gt. 

One export official noted, “Flows are so weak, it is hard to forecast what we will have available at this time.”

There were two export cargoes sold from the US this week at the European price levels or a few dollars more. The sales prices were considered on the weak side, and neither cargo contained HMS, which appears to be in short supply.  

Midwest 

A scrap executive in the Midwest cited a supply-driven market. This could drive up the February price on shredded and other obsolescent grades by $30/gt. 

However, he does not see the demand for prime grades at that level.

The lack of automotive demand for hot-rolled coil (HRC) is limiting demand for the grades of #1 Busheling and #1 Bundles. Sales of autos seem to be weak, and the automakers don’t need much HRC.

He also mentioned the price of pig iron has dropped by $20 per metric ton recently. This can be used more widely since its value in use is at its traditional range compared to #1 Busheling. 

“So, no need to reach for it,” referring to busheling, the scrap executive added.

It should be noted, though, that mills are currently using pig iron bought several months ago when prices were relatively high compared to scrap. 

It usually takes 90 days from the time of purchase to delivery to the user. 

Great Lakes

SMU heard from a purchasing executive in the Great Lakes region who said he does not believe the mills will attract any more scrap by increasing prices by more than $20/gt.

“However, the first deal in this trade will be the best for a consumer and the worst for the dealer,” he said, with apparent caution about possible resistance to the initial bids. 

He expects the current supply-driven situation to correct in March, if not April.

South

Moving to the southern districts, one SMU source told us an increase of $20/gt across the board “is in the bag,” as mills with whom he has discussed the market all say they will buy at this level for February.” 

Despite most dealers experiencing a drop of 30% in daily scrap intakes in January throughout the Southeast, he said mills still may be successful buying at only up $20/gt.  

Therefore, it appears steelmakers will fight any increase beyond $20/gt.

We’ll have to wait to see if the situation on the ground will comply with what the Southern-based mills are expecting. 

According to this source, the mills would rather cut production than increase scrap prices beyond $20. 

Our sources all say the mills will try to procure their tonnages fairly and promptly.

To summarize, scrap prices are going up at least $20/gt for February. It remains to be seen if this increase will draw enough tonnage to fill the increased demand on the part of the steelmakers.

We expect that the market will be forming next week.