HRC vs. prime scrap spread continues to widen in December

Written by Ethan Bernard & Stephen Miller

The spread between domestic hot-rolled coil and prime scrap prices widened for a third consecutive month in December, based on SMU’s most recent pricing data.

SMU’s average HRC price was $895 per short ton (st), FOB mill, east of the Rockies, as of Tuesday, Dec. 9. That’s even with the previous week and up $65/st from the prior month.

Meanwhile, busheling tags in December increased $10 month over month to an average of $400 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 $538/st as of Dec. 10. That’s a jump of $56/st from a month earlier. We have to go back to mid-January 2024 to find a wider spread when it stood at $588/st (Figure 2).

What’s going on?

US steelmakers raised #1 busheling by only $10/gt in December, despite other grades moving up $20/gt. As mentioned, HRC went up by $65/st ($73/gt) during the same period.

The scrap trade is expecting busheling prices to increase further in January. At this point, it’s hard to say how much. Predictions are $20-30/gt, with many saying these figures are conservative.

In January, it is also speculative to say by how much HRC prices could increase, if at all. However, unless they go up $20/gt, this spread should start to narrow or hold pat. In any case, the spread should remain very generous for EAF-based flat-rolled steel producers. Many believe they need increases in volume rather than price.

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 124% premium over prime scrap, up from 113% a month ago.

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-plus 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.