US scrap prices to go up in May

US scrap is anticipated to continue its upward trend in May, with prices expected to go up by up to $40 /long ton (lt), thanks to the rising scrap demand from foreign countries, particularly Turkey, which is boosting the US scrap export market.

The US domestic scrap market is still quiet. There are limited domestic sales in the market, although there are also low scrap supplies, as there is less scrap being generated from the slow manufacturing sector. On the export side, prices have continue to move up steadily since late March, due to the up-tick of scrap and finished products demand in Turkey, the leading importer of US scrap. Thus, scrap dealers who typically focus on domestic business are now also seeking ways to enter the export business. US scrap dealers comment that with domestic supplies being tight, even with the low domestic steel demand, there is still a shortage of scrap tonnage to sell to the export market, particularly on the East Coast. These dynamics will affect the domestic market as well, and thus, domestic scrap prices are expected to go up as much as $40 /lt in May.

In May, it is expected that US domestic busheling scrap will rise to the range of $220 to $230 /lt, shredded scrap will increase to a range of $215 to $225 /lt. HMS I should rise to a level of $190 to $200 /lt.

Although US scrap pricing is expected to rise in May after posting slight gains in April, it can't be said that prices will continue to rise in the following months. Steel analysts told delegates in Las Vegas last week at the Institute of Scrap Recycling Industries, Inc. (ISRI) Convention that they expect domestic steel demand will continue remain sluggish for the duration of 2009.

Gavin Montgomery, steel analyst from CRU, mentioned in his presentation at ISRI that scrap consumption may not return to the 2007 level until 2012, due to the gradual pace of demand recovery and the overcapacity problem throughout the industry. Chuck Bradford of Bradford Research Inc. indicated that some improvement will likely be seen later in 2009 or next year. Bradford pointed out that the inventory cycle will take longer to complete than in the past, as some service centers are working off their overstocked inventories and inventories in the auto industry remain too high. However, he is expecting a consumption up-tick over the next few months. Bradford stated that 30 percent of steel making goes to construction and infrastructure, such as schools and hospital building, highway, and bridge, which are all likely to benefit from the government stimulus package.