Ferrous Scrap

Will scrap export prices hold amid domestic market slump?

June 14, 2024

As the scrap market for June settles at lowered levels, let’s look at the situation for exports of ferrous scrap from the US East and Gulf coasts.

Despite declines in the North American ferrous markets over the last two months, export prices have remained range-bound within a tight trading window. After a brief decline last week into the high $370s, the price for Turkish cargoes of both US and European origin jumped back into the $380s. Will export prices from North America remain at these levels even after the Canadian and US domestic markets have faltered?

RMU reached out to a prominent exporter very familiar with the situation. According to him, one reason for this continued strength is that there seems to be a shortage of scrap in Europe, especially shredded scrap. He added that, even though the markets in Mexico and India have quieted, steady demand from Turkey has caused their buyers to continue to book cargoes from North America, where supply has been available.

Looking at what transpired in the US market last week, the case can be made for fairly firm shredded scrap prices. Although prices for shredded dropped $20/gt virtually nationwide, other grades like busheling and P&S were down $30-50/gt. Since shredded only went down $20 after going sideways in May, its price is $5/gt over busheling in some districts like Chicago and Detroit. It is thought that the steelmakers are afraid to price shredded too much lower. They need a reliable flow since shredded is the staple of numerous melting programs. This activity seems to bear out that shredded supplies are under pressure as the numerous shredders across the country compete for feedstocks, which could dry up as prices wane.

Several exporters have reported growing demand for full shredded cargoes from all US coasts, and most sellers can only meet these demands if the cargoes also contain a significant amount of HMS 80/20, as most cargoes destined for Turkey usually do. After all, 30,000-35,000 mt of shredded at a time is one to two months of generation for most producers!

Given this situation, it would not be surprising if a floor on shredded scrap has now been reached. The exporters are now waiting for the next round of purchases from Turkey to see if export prices can remain firm even though the North American domestic markets have declined.

In other export news, China is considering relaxing some restrictions on what grades of scrap can be imported into that country. Since the Chinese revamped their import specification in 2021, there have been no imports of HMS1/2 80/20. This grade is the main export scrap grade throughout the world. If Chinese customs were to begin approving this grade for importation, it could have a dramatically bullish effect on scrap shipments from the US and other exporting countries. A decision could come this summer.

RMU will follow up on this potential event.

Stephen Miller

Stephen Miller started his career in the scrap metal industry in 1978 at Luria Brothers in Cleveland. Over the last 40+ years, he has worked in all capacities in the trading business. He has had positions in both domestic and international scrap trading. In addition to scrap, Miller was at the forefront of the pig iron trade and established a pig iron distribution company under the name of Ferrosource, Inc. Most recently, Miller has concentrated on the scrap export market and regularly does consulting for several companies in the industry.