During the May US domestic scrap buy cycle, scrap prices generally trended strong sideways on prime scrap grades, solidly declined $10-15/mt on shredded scrap and moved sideways to slightly down on HMS I and P&S scrap grades, depending on region.
The outlook for July is presently influenced by several factors including vulnerable flat-rolled steel prices, slight obsolete scrap (HMS I, P&S, and shredded) oversupply, and the scrap export market. According to sources, mills are expected to retain tight reins on their scrap requirements into July due to tight inventory management policies, summer seasonality and planned maintenance schedules.
Some sources have expressed doubt about the recently announced flat steel price increases prevailing in the market without additional protectionist safeguards or an increase in industrial demand. Much of the optimism in 2017 has been riding on investment expectations based on promises from the Trump administration, but fundamental policy changes and bills with concrete infrastructure investment plans have not materialized after six months. Regulatory changes including the easing of environmental laws to open various iron ore mines along with the construction of oil pipelines have provided confidence according to a source, but mills are also wary of potential risks, and as a result they have heightened their inventory management policies.
Historically, summer usually sees an abundant supply of obsolete scrap material in relation to demand due to planned maintenance schedules, active demolition projects and active selling of scrap peddlers into the scrap yards. To manage supply, scrap yards are also closely monitoring their inventories to minimize exposure and adjusting prices downward as necessary to manage feedstock. Despite management efforts, a dealer source noted the possibility of a continued “slight overhang of obsolete scrap supplies” through the summer in some regions which may result in soft sideways trading in limited July transactions. Prime grades, though, are expected to hold prices firm in July based both on tight supply and strong demand. The supply is expected to fall as auto industry manufacturers implement extended summer maintenance shutdowns.
On the export front, with the recent Turkish purchase of ex-US scrap at $277/mt CFR for HMS I/II 80:20, $282/mt CFR for shredded and $287/mt CFR for bonus grade the week ended June 16, which was $3/mt higher than the previous purchase the week ended June 9, domestic scrap traders are hoping for continued purchases by Turkey at stable levels as end-of-Ramadan holiday approaches.
However, sources say export demand is generally weaker at the moment. On the East coast, shredded scrap has been purchased but on limited demand from Turkey, India, Pakistan and other destinations through June. On the West coast, Taiwan has continued purchasing limited containers of HMS I/II at slightly higher prices, but Vietnam and South Korea are limiting ex-US purchases as they assess Chinese origin scrap.