US domestic scrap market braces for another fall

Expectations that US domestic scrap prices would fall once again in early May have grown more pronounced in recent days. It didn't take long after the April market settled for mills, scrap dealers, and other market participants to begin anticipating prices to fall again in May. Scrap demand from mills has been soft in the last couple months but not because of any decrease in production. Raw steel production at US mills has been mostly steady to up in the past month--despite a drop last week--and the capacity utilization rate continues to average at over 75 percent. However, finished steel prices for a number of products, particularly flat rolled, are soft and mill orders books are weak.

As a result, sources tell SteelOrbis that many mills have essentially been starving themselves of scrap recently and could soon be forced to make big buys. Additionally, river flooding in the Midwest led some to expect tighter scrap flow in May, but both of these scenarios are currently unlikely to be enough to prevent a drop in prices for next month. In particular, export scrap activity has been extremely quiet throughout all of April. Turkey appeared ready to more cargos from the US this past week, but at prices lower than just a few weeks ago. The general prediction for domestic scrap prices in May has been a drop of about $15-$20/lt in the past couple weeks, but rumblings of early East Coast buys at prices down $20-$25/lt may be telling of a more significant drop. Nonetheless, the market is unlikely to settle for at least another week.

US domestic scrap prices in early April were as follows: