The Eyes of March are Focused on Scrap

Early indications are to expect scrap prices to return to January levels ($10 to $20 per gross ton higher than February levels depending on product and location). A $20 per ton increase in scrap would support higher steel prices and, perhaps, allow the domestic mills to open slightly wider margins if they are able to collect more than $20 from their customers.

However, this time the dealers may have more than just getting back to January levels on their minds. Mike Marley reported on Friday in his scrap report (Heavy Melt #67):

Price expectations in the ferrous scrap market can snowball as a new month gets closer. Speculation feeds on itself about the likely pace of activity in the upcoming buy week, the first full week of each month. Perceptions take on a life of their own and gain more power with each passing day.

Throughout much of this week, dealers talked about steeper price increases they expect to see in March. Some said they foresee prices increases of $30 per ton, a few are looking for hikes of as much as $50 a ton on some grades. A week ago, many said only that they expected prices to return to January levels when the buying begins and recoup what they had given up in the February price negotiations. Now, however, the industry may be taking to the court for its own version of March madness and figuring the outcome to this month’s price contest will be a slam dunk for its team.

Negotiations will be in full force early this week and we should have a clearer picture by Thursday or Friday as to what price levels mills will be paying for scrap during the month of March. Once we know scrap prices then the focus will return to steel prices and market fundamentals.