US domestic scrap market pessimistic after May drop

US domestic scrap prices went sideways to slightly down in May amid oversupply of scrap and scrap substitutes and a lackluster scrap export market. Mid- to late-April predictions for US scrap prices in May actually pointed to an uptrend, but while some dealers resisted lowering prices this month, leaving shredded and HMS I scrap prices little changed in some regions such as Chicago, others were forced to succumb to mill pressure to lower prices; prices fell a more substantial $10/lt in some Southern cities where scrap prices were stable in April. Overall, HMS I, shredded, and busheling prices went sideways to down $5-$10/lt at the beginning of May.

In St. Louis, busheling prices were sold as low as about $420/lt, falling just below the price of shredded scrap in the region--while sources tell SteelOrbis that this dynamic is not sustainable, some indications are pointing to additional drops in busheling prices next month due to high levels of domestic busheling production, and the availability of pig iron--the latest pig iron offers from Brazil were approximately $477/mt CFR NOLA. Further, a number of mills have scheduled summer maintenance outages, lessening the amount of scrap they will need to buy next month. Even though there remains more downward pressure on busheling than other scrap grades, if the export market doesn't firm, shredded and HMS I prices could face additional softening. And in the last week, export yards have dropped their prices to the port by about $5-$10/mt and the export container scrap market remains slow after increases in container rates in April.