October Scrap Settles Down $50-$60

Here is how one of our scrap sources put the trading this past week:

“The market was down anywhere from $50-$60/GT this week as trading drew to a close.  Shred traded at a slight $5-$10 discount to busheling.  Scrap demand was clearly weaker in October than in September due to higher inventories owned by mills and lesser demand for finished product.  But even at the end of the week, the mills were still buying a little scrap.   My sense was that the at least one large mill-owned broker thought this was a good buying opportunity.  In fact, I could have sold more scrap on Thursday at the same number I was offered on Monday.  

That demand was off this month is not uncommon for October.  Finished prices are still falling, and new orders have yet to be placed.  But with prices going to the levels where they have, we will get back to an equilibrium balance of supply and demand very soon.  I don’t know if that is November but it’s not long after that in any case.  

We could still see some overhang heading into next month from dealers who need to sell to generate cash flow.  But scrap flows will dry up before long because of prices and the season, and we will get a snap back higher as mills will have to bid against one another to get the limited amount of scrap out there. I think we are looking at the next 60-120 days for that to happen.  I am not so optimistic that the spike will be sustainable.  There are, at the end of the day, too many iron units available in the world and relative to demand that is not going to change quickly.  So this $190/GT +- $30 or $40/GT either way may be a new level for scrap over the next year or so.”