Steel Products

February Scrap Market Could Be a Mixed Bag

Written by John Packard

Mid-Atlantic Projected Higher – Midwest Sideways to Slightly Lower

The February scrap markets are beginning to take shape and our sources are advising SMU that the negativity which existed one or two weeks ago may be waning. Indications are now for a rising market in the east and a sideways market (with a chance for an upside surprise) in the Midwest as a debate brews as to whether demand is strengthening and mill operating rates are improving. At the same time flows into the yards vary due to weather.

A large Midwest based scrap source told SMU, “Flows on obsolete scrap are less than stellar and demand appears to be increasing as mill operating rates recover. With steel selling prices moving higher, I believe a sideways move for scrap is more sustainable.”

While out of the Mid-Atlantic one of our scrap sources told us:

The February market looks to be the stories of different regions. The Mid-Atlantic region appears to be the strongest as the exporters have sold a lot of scrap in the last month and the local mills are melting well. The exporters don’t own all the scrap they’ve sold. With that said, conversations in recent days about reduced demand among the flat rolled producers and some slightly lower export sales have tempered talk around here of an up market in February. Mills now think they can buy at cheaper prices in February; around here I don’t think they can. Flows in general are not great and the exporters have had and continue to have some pricing power based on the sales they made earlier in January. The bottom line is that the scrap processors can’t replace what we’ve sold in January at lower numbers.

The Midwest and OH Valley are a different story. Demand for finished products has not improved and even deteriorated in recent weeks. Scrap demand has followed, and we are facing a weaker market in those regions for February – maybe down by $10 – $20/GT.

Scrap guru Mike Marley of World Steel Dynamics reported at the end of last week in his scrap report that export sales and prices off the east coast had weakened.  He reported only one Turkish steelmaker placed orders last week for USA scrap at $401 per tonne delivered to a Turkish port for bellwether 80/20 heavy melt.  This is about $5 per tonne less than sales made earlier in the month.

Scrap – and the direction of scrap pricing – will be watched very carefully by steel buyers as they struggle with justifying the most recent round of price increases by the domestic steel mills. Scrap prices have been trading sideways for the past two months in the Midwest markets. A move lower could be problematic for the domestic mills as they try to collect higher spot prices. One Midwest service center spelled it out for SMU this afternoon when they told us, “There’s growing consensus around a $10-20/ton drop for Shredded, but Busheling may go sideways. The headlines will be the down $10-20 however, and that won’t help with the mills’ cause.”

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