August scrap outlook hazy on potential tariff impact

He said not all mills are running under capacity. Steelmakers involved in supplying the defense establishment are running well.  But he does not see potential tariffs on pig iron creating an upward trajectory on prime grades, at least not right away.

The latest word on pig iron tariffs is most players do believe they will be instituted. This will cut off supplies from Brazil unless both buyers and sellers come up with a plan to continue shipments with both sharing the tariff burden.

As of today, there has been no decision on the part of US buyers whether to accept deliveries of pig iron after Aug. 1 if they are tariffed.

Tariff impact?

What effect will a 50% tariff on pig iron have on domestic scrap prices?

SMU spoke to a Chicago-based source about this situation.

He said if this tariff announcement is enacted, not only will prime scrap prices rise in August, “Other grades will also increase.”

He added mills are saying they will increase scrap usage to replace pig iron.

Another scrap executive in the Southern region expects scrap to be generally sideways for August.

But he is cautious about the effect of pig iron tariffs. They could have a psychological effect on busheling in August, followed by a more pronounced influence in the months thereafter.

In summary, the pig iron tariff threat and the possible tariffs on scrap imports are having a paralyzing effect on decision-making for steel producers and raw material suppliers. Most are in a “just wait-and-see” posture.  At SMU, that’s what we’ll have to do also.