Final Thoughts: Summer scrap primer

While price is always a top-of-mind issue, geopolitical uncertainty will almost certainly play a role in the coming months. The Iran war, with its tenuous ceasefire, has the ability to affect shipping lanes. Also, if the price of oil shoots up, freight prices will be further impacted. So that’s something to watch out for. (Editor’s note: Be sure to join us this Thursday for a free SMU Community Chat with Anton Posner of Mercury Resources to discuss these issues. You can register here.)

Beyond that, regular seasonality and mill dynamics are sure to play a role. And, don’t forget, tariffs. The USMCA is up for periodic review in July.

That’s why we turn to SMU’s resident scrap expert Stephen Miller. Beyond May, here are the factors that could be shaping the scrap market, particularly the prime, shredded, and HMS markets. Will prices be ticking up along with the mercury?

Miller’s view

In the summer months, the scrap market usually hibernates a bit in June and July after a spring price decline. This is usually because steel production declines with summer vacation schedules and/or a weakening in the order book due to summer economic slowdowns.

This year, the scrap market has, by and large, held firm after the winter price increases. There has been a steady increase in steelmaking throughout 2026, and demand for all grades of scrap has been maintained. The export markets, which had been a drag on domestic prices, have made a decent comeback. 

Therefore, the months of June and July may not be as lackluster as the past several years. We all witnessed how long it took for the May market to settle entirely. Mills had to put their foot down to keep prime scrap sideways to up marginally. It does not appear it will get any easier.

As summer unfolds, the market is likely to see a decline in industrial-grade generation due to automotive shutdowns and retooling. Add this to an already pedestrian supply of prime grades in a vibrant HRC flat-roll market, and the competition could get fierce.

Also, the ever-increasing price of pig iron is creating a large spread between these two commodities. Tariffs are making it worse.

Prime scrap is not the only problem potentially ahead for all scrap users. Shredded scrap could show some signs of age at these current price levels. I’m not saying there will be a genuine shortage, but the price of shredded may have to rise for it to continue to be produced in the volumes the steel industry demands. In May, nobody even tried to drop shredded prices.

In talking with processors of this grade, many are saying they are continually having to overpay for feedstock. Not that this is anything new with the proliferation of shredders over the last two decades. Shredders were able to achieve profitability by recovering nonferrous metals from the feedstock. However, these metals have now basically been cannibalized before the feedstock (auto bodies) are delivered into the shredding facility. This cannot go on indefinitely. 

Regarding other issues, like the USMCA negotiations and the United Steelworkers (USW) contract talks, we have to see what transpires with fingers crossed. The US steel industry certainly does not need scrap tariffs or other cross-border restrictions on raw materials. I have a feeling the steelworkers are going to take a hard line on labor issues after some of the steelmakers’ earnings reports of late.

As always, we thank you for your continued interest in Steel Market Update.