Ferrous Scrap
Ferrous scrap mart seen sluggish into the holidays
Written by Stephen Miller
November 26, 2024
The ferrous scrap markets both here and abroad are displaying a definite lack of enthusiasm as we head into the holiday season. With the election of Donald Trump to his second term, many thought our industrial production would be bolstered. The stock and crypto markets shot up. But you’d never know it with steel and recycled ferrous metals. These markets are showing few signs of strengthening (though we’ll soon see what happens after Trump has threatened new tariffs on China, Mexico, and Canada). At the moment, December projections are looking weaker.
Trump’s election victory has strengthened the US dollar from EUR/USD 1.09 to 1.04, as of Nov. 26 on XE.com. This has had the effect of weakened scrap prices, which Turkey has had to pay European exporters. The increase in the dollar vs. the euro allows dealers to buy their scrap in euros but get paid in dollars. Over the last month, Northern European export prices were averaging $364 per metric ton (mt) CFR. Since Nov. 5, this price has eroded to about $343/mt, with new bids in the $330s. To be honest, the currency fluctuations are not the only reason for the declines. Poor steel demand shares the blame.
According to an executive in the North American export trade, there haven’t been sales at these levels from North American exporters, who are not enjoying the currency bonus. But, if they want to sell, he said, they will have to knuckle under to European price levels with an allowance for the difference in freight. We’ll see if they do.
So what’s happening on this side of the pond? November price tags were largely sideways, with a few districts managing a $10-per-gross-ton drop after a few days of haggling. December is shaping up as a “soft sideways,” though some are calling it down.
SMU sought the opinion of a raw materials purchasing manager at a steel mill in the Great Lakes region. He commented that “inventory levels are not abundant in scrapyards or mills at this point.”
In December, mills are carrying low inventory to improve cash flow going to the end of the year, he continued. He expects to see a soft sideways move for December.
“I feel dealers will hold their tons if they hear/feel downward pressure,” the purchasing manager added.
For January, he believes mills will be looking to buy more scrap to bolster inventories for the colder months, but doesn’t see big premiums for larger tonnages of prime scrap getting out of hand.
Another scrap seller in the Southeast thought the December market would be down but only marginally, “probably $10/gt.”
When asked about the extended weakness some players are predicting for January, he disagreed. Without putting a number on it, he thought prices should be stronger.
Heading up to the Midwest, a manager of a large scrap concern in the region was less optimistic for both December and January.
He said, with deals on hot-rolled coil (HRC) continually settling in the $640s, he’s thinking there will be an 80% chance of things being down and 20% sideways. Demand for HRC just isn’t there.
The Southeast manager continued that this fall in pricing would have happened sooner if it weren’t for the Covid-19 pandemic and the Russian/Ukrainian war.
He went on to lament the situation we now are experiencing, saying over the last two to three years both industries were enjoying the best of times, with high prices and good demand. The economy was coming back nicely from the Covid closures. And, despite inflation, consumer spending held up.
Then, things inexplicably started to unravel. Was it poor steel demand or increased supply? It sure wasn’t like other downturns we’ve endured over the last few decades. At least we knew what caused those. Nobody has explained what caused this and how it’s going to improve.
Stephen Miller
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