Scrap market sources throughout the US agree that July prices will trend downward. And while some believe that HMS and P&S are likely to settle at sideways to down $20/gt (with HMS being the strongest grade going into July), it’s also suspected that busheling and shredded will settle at down $20-$30/gt, depending on the region.
“I think busheling and shred will trade in tandem,” a source said. “If one goes down by $20/gt the other will trade down by $20/gt.”
Others have pointed out that despite the fact that softer manufacturing rates are likely leading to declines in busheling scrap production (i.e., S&P Global has reported that the US Manufacturing PMI fell to 46.3% in the current month, against 48.4% for the month of May. Anything over 50% reflects expansion, whereas anything below that suggests contraction), that softer pig iron prices will be a main source of downward price pressure for prime grades in the upcoming buy cycle.
Still-soft flat rolled steel prices are also expected to put downward price pressure on the market in July. Sources within the flat rolled steel sector have said that despite mills' attempt to push prices upward, this month's price increases "went nowhere fast."
Scrap market sources have said thee believe this will lead mills to put pressure on raw materials costs.
"I’m also herring that July will be] soft sideways to down slightly,” another source said. “Flows have not slowed down yet so the mills may still have the upper hand.”
Sources in other regions, on the other hand, have said they’ve seen flows decline in the past 30-45 days.
“It may be summer but that doesn’t mean that the peddlers are willing to let themselves get beat up on price,” a Midwest-based source said, adding that what happens in July will likely have a bit of regionality to it.
A final source in the Southeast agreed that July's prices will be regional.
“I’m [thinking] down $20-$30/gt on prime scrap. It needs to fall if you assume pig prices are going to be in the $460/MT range,” he added. “For everything else, I think the South is closer to sideways and Midwest closer to down $10-$20/gt.”
The July scrap trade is not expected to commence until after the July 4 holiday.