U.S. scrap prices are forecast to go higher next week as the U.S. steel mills negotiate with the scrap dealers for the month of November deliveries. Scrap prices impact steel prices such as hot roll, cold roll, galvanized and Galvalume steels as well as long products.

Not many scrap deals have been consummated for November according to our sources. However, of those who have struck deals prices are up compared to where scrap was trading at the beginning of the month.

Our sources in the eastern United States are reporting transactions to two domestic mills for shredded scrap. The prices this week are $370 per long ton delivered which represents an increase of $25 per long ton compared to the $345 per long ton number from the beginning of October according to one east coast dealer who confirmed prices to SMU earlier today.

Over the past four months scrap prices have been bouncing more so than normal. Much like the steel business scrap prices tend to follow a trend – if they are moving higher they tend to move higher for a number of months and the same when prices move in the opposite direction. Shredded scrap prices to one of the Ohio area mills provide a good example of the bouncing around the dealers have had to contend with. August shred was $345 per long ton, September bounced up to $375 per long ton, October dropped to $335 and the latest number being booked for November delivery is $370.

In the Chicago area our sources are indicating a slightly softer market than in the east as one dealer told SMU, “Pricing seems firm on some grades and sideways on others. Demand in Chicago is not good. Flows of obsolete are down.”

One dealer told SMU, “I don’t think the markets are going much higher than $25-$30.” They went on to say, “I don’t know how many transactions there will be in November. Flat rolled is not great [demand for scrap is down to the flat rolled mills].”

A large multi-location dealer told SMU earlier today, “Secondary grades are being pushed higher (+$15-25/gt) primarily by export demand as a weaker dollar and declining deep sea freight rates persist. Anticipated reductions in domestic steel production rates will likely be offset by reduced seasonal scrap flows. Although demand for busheling and bundles will be softer in November, pricing will likely hold even in sympathy with the obsolete market, particularly given the further reduction in spreads between prime and obsolete scrap. Interestingly, the import iron markets appear to have rebounded back into the $440-$450/mt NOLA range in recent days, as lead times for Pig and HBI have been pushed into Q1.”

Prime grades as the primary feed stock to the mini-mills like Nucor. We will need to stay focused on scrap transactions as we enter the month of November to see if prices on prime move in tandem with shredded scrap or if they will move sideways. Prime grades at the beginning of the month of October ranged from $380-$390 per long ton in most markets.

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