HRC vs. prime spread widens again in November

Written by Ethan Bernard & Stephen Miller

The price spread between HRC and prime scrap has widened for a second month, based on SMU’s most recent pricing data.

SMU’s average HRC price was $830 per short ton (st), FOB mill, east of the Rockies, as of Tuesday, Nov. 11. That’s up $5 from the previous week and $30 from the prior month.

Meanwhile, busheling tags for November stayed flat month on month at an average of $390 per gross ton (gt).

Figure 1 shows price histories for each product.

After converting scrap prices to dollars per short ton for an equal comparison, the differential between HRC and busheling scrap prices was $482/st as of Nov. 11. That’s an increase of $30/st from a month earlier. This is the widest spread since July, when it stood at $491/st (Figure 2).

What’s going on?

The scrap market has started to show some firmness, as November’s sideways move suggests a bottom has been reached.

Scrap flows will be slower in December and won’t meaningfully recover until spring, weather permitting. So, in the December-February period, scrap prices are expected to increase.

The amount of that increase is speculative, but over the last three years, prices increased by $80-100/gt during the winter months.

Therefore, unless HRC prices match or at least track the upward movement in scrap, the spread between busheling and HRC is likely to narrow.

HRC premium as a percentage

The graph on the right-hand side of Figure 2 shows the spread relationship differently: We have graphed HRC’s premium over busheling scrap as a percentage. HRC prices now hold a 113% premium over prime scrap compared to 105% a month earlier.

Ethan Bernard

Ethan Bernard is managing editor for Steel Market Update. He previously worked for American Metal Market as a copy editor in the New York office for two years, starting in 2008. Later, he copy edited AMM’s monthly magazine on a freelance basis from 2015 until 2017. With experience in financial copywriting and textbook publishing, he holds a BA in Comparative Literature from UC Berkeley, and an MFA. in Creative Writing from New York University. He can be reached at ethan@steelmarketupdate.com or 724-759-7871.

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.