Ferrous Scrap

RMU: Summer supply crunch has scrap sentiment faltering

Written by Stephen Miller

Earlier this month, steelmakers entered the scrap market at mixed pricing. The prevailing price for obsolescent grades fell $20 per gross ton (gt). However, some notable districts decided to only drop $10/gt.

The primes grades traded sideways in all districts, further widening the premium over shredded. At this early point, it’s a hard call to predict what June prices will do. Still, the sentiment is looking slightly weaker as steelmakers are announcing summer outages and hot-rolled coil (HRC) prices continue to fall.

Opinions do vary, however.

A source in the Chicago district said, the feeling is the market may have bottomed, but “there’s no room for it to go up.” This may be because of the numerous outages among the steel industry. This may trump any slowdowns in scrap flows.

Another source commented that even though shredder feed is becoming more competitive to obtain at prices that allow a reasonable profit, the prospect of lower scrap demand this summer should keep prices in check. He also said that if the steelmakers try to take down the market sharply, shredder feed could dry up. This would probably force prices up given the reliance on shredded scrap among EAF consumers.

There are other considerations in the ferrous equation to address. They include a firm export market, at least for now, and recent higher asking prices for pig iron. But in the end, demand for scrap in North America will be the deciding factor.

Editor’s note: This article appeared first in Recycled Metals Update (RMU), SMU’s new sister publication. RMU is devoted entirely to the ferrous and nonferrous scrap markets. If you’d like to learn more, visit RMU’s homepage and take out a free, 30-day trial.

Stephen Miller

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