The February outlook for US domestic scrap prices is trending bleak, as prices--which were once expected to trend down anywhere between $30-$50/lt for this month’s buys--could trend down as much as $60-$80/lt, depending on the region. “At this point it’s like the market is a runaway train; all we can do is step aside, watch the carnage and try to pick our business back up from there,” according to one East Coast-based source.
Export prices are influencing the domestic trend, with the most recent cargos to Turkey trending down $13-$15/mt CFR in the past week, bringing East Coast export prices to $250/mt CFR for HMS I/II (80:20), $255/mt CFR for shredded and $260/mt CFR for P&S scrap. Some sources believe these are the numbers needed to allow EAF mills to better compete with the integrated mills, who have had markedly reduced production costs due to cheap iron ore costs.
Thus, domestic East-Coast Philadelphia prices, previously at $315-$320/lt for HMS I/II, $340/lt for shredded and $330/lt for P&S scrap for January buys, could very well settle to $250/lt for HMS I/II, $260/lt for P&S, $270/lt for shredded and $280/lt for bundles and busheling.
Chicago prices, which were at $330/lt for HMS I/II, $365/lt for busheling and $335/lt for shredded scrap in January, and Ohio Valley / Pittsburgh-Cleveland area prices, which were at $325-$330/lt for HMS I/II and $370-$375/lt for busheling, are also forecast at a downtrend.
“It’s the perfect storm,” according to another source, who feels there could be an upside to the down market. With cheap raw materials costs and falling energy prices, US mills will be better able to compete with finished steel imports.