Mixed Outlook for Ferrous Scrap Prices in October

Demand for shred is growing as mills that have adequate scrap substitutes on hand, such as pig iron, reduce prime scrap consumption and increase obsoletes. “With colder weather on the horizon and a seemingly bottomed export market, the mills’ top priority will be to keep the inbound scrap pipeline full even if that means raising prices,” he said.

Prime scrap, on the other hand, is in decent balance, with supply catching up to demand. In some regions of the country there is excess prime scrap and mills may try to push prices down, he added.

Another scrap executive tells SMU he expects prices for shred and cut grades to be slightly higher in October, up $10-20/GT. “That may a little optimistic at this early stage, but I think that’s ultimately what we will see. We are seeing strong demand for containerized shred to Asia. Scrap export prices to Turkey will remain in a range until Asian rebar demand lifts prices a little higher. Raw material inflows are slower after 2-3 monthly drops, and winter is coming. Primes may dip or stay sideways to balance out with the pig iron pricing. I think the minimills ultimately will see October as the last good buying opportunity for a little while, despite some outages in October and November.”

The U.S. scrap market is poised to bottom out in October, concurred another scrap expert. The export markets off the East Coast have not been able to hold the $450/MT CFR Turkey level on HMS. The Baltic shippers have continued to support downward pricing to levels well below $435. U.S. exporters have not supported prices at these levels, at least not yet. Prices are somewhat better off the West Coast since there seems to be more competition for scrap in the Southeast Asian market, he said.

Shredder feed flows in parts of the U.S. have appeared to slow, while in other parts they are the same as in previous months. So a great number of dealers are calling for shredded to rise $10-30/GT, with busheling going down $20. HMS and P&S grades are forecasted sideways. 

“If this does indeed happen, then it’s the bottom for sure. On busheling, even though it may be weaker, many dealers are not sitting on larger inventories now. They sold all of it in August and September. The mills will have to make do with current industrial generation,” he said.

Pig Iron Market

The pig iron market has seen some movement, reports one SMU source. The Chinese have resumed their purchases from both Brazil and the CIS. There was a CIS cargo sold to the U.S. at $542/MT CFR, which raised prices by $8-10/MT. The Chinese bought four CIS cargoes at estimated CFR prices of $550-555/MT. So this market has strengthened for now. It’s unclear if the Chinese will continue to buy amidst reports of electric power rationing and outages. The U.S. mills are well supplied for now, but will probably return to the market next month or in November, he said.

By Tim Triplett, Tim@SteelMarketUpdate.com