Miller on Scrap: Export prices starting to play catch up

Export market poised for revival

Last week saw the US dollar weaken against the Euro after three months of strengthening following the US election. This had caused scrap prices paid by Turkey to decline as Northern European shippers collected their domestic scrap in Euros and sold it in the appreciating dollar.

Now, the reserve is becoming more pronounced. The outlook is for scrap prices to continue climbing in Europe. This may start to attract North American material, which had remained at home as US prices drastically increased – thereby drawing scrap from the coasts into mills located inland.

Case in point: A US-based exporter sold a cargo of HMS 85/15 at $376 per metric ton (mt) CFR to Turkey. That cargo also contained shredded at $393.50/mt. This was a considerable increase over cargos sold earlier this year.

Could flows reverse?

Domestic shredded scrap has experienced a renaissance in pricing since January. And that increase had caused traditional exporters to ship their material to domestic users instead of overseas.

This has eased the potential price appreciation of US domestic scrap as demand rebounded when steel tariffs were reimposed and poor weather hindered collections.

But with these recent changes, this cycle may end with the resurgence of export demand and continued foreign exchange fluctuations.

US pricing outlook less bullish for March

With the spring thaw forthcoming, the flow of obsolete scrap is much better. And US prices appear to be less likely to receive a dramatic boost in March. We will see how it plays out this week.

Meanwhile, the blanket tariffs against Canada and Mexico have again been delayed. This has eased the threat of a severely elevated March scrap market.

Tariff uncertainty looms over April

We don’t know what April will bring. And that uncertainty could cause the export market, at least off the US East Coast, to become more relevant. It may be interesting to see how US mills do without the scrap flows from coastal exporters.

We do not really know yet how tariffs will affect the steel and scrap industries, or for that matter, the general economy. In this current unpredictable environment, it is hard to see very far ahead.

There are plenty of permutations of events that could change the steel and scrap landscapes for better or for worse. SMU will try to keep up with them.