US domestic scrap prices may have spiked during this month’s buy cycle, but sources close to SteelOrbis say they believe the uptrend “isn’t over yet.”
“The [domestic] capacity utilization is over 70% and there’s less scrap being collected because of COVID, the fact that we’re in the middle of the holiday season, and the winter weather isn’t exactly helping,” a source said.
Collection rates are likely to experience additional short-term challenges, due to a “serious snow and ice storm” that’s about to pummel the Northeast. As of yesterday, news outlets reported that more than 60 million people were under a winter storm watch. Parts of some states, including Pennsylvania, New York and Massachusetts could get more than 12 inches of snow.
“I think we’re going to see a strong uptrend come January,” another source added. “I don’t think there’s a single purchasing agent in the country that’s happy right now. There’s absolutely no uniformity in pricing. If you need scrap, you’re going to pay whatever you have to, to get it.”
A Chicago-based source agreed. “It is a scary market right now,” he said. “There is a real possibility that material may be hard to find this winter. I’m hearing prime scrap is already getting short on supply.”
As far as how much of an uptrend the market could experience, sentiment is mixed. Some are pegging January at up $30-$40/gt, while others think that a prediction of up $50-$60/gt is “conservative.”
“[HMS I/II 80:20] dock prices on the East coast have risen to $290-$300/gt,” another source added. “Dock prices in Los Angeles jumped from $220-$240/gt to about $285/gt in the span of a week. If the domestic mills want to compete with the exporters for the limited scrap that’s out there, they’re going to have to pay up.”
In the Ohio Valley, several said that while higher sales prices are a good thing, they’re “just waiting for the bubble to pop. Another source in the Midwest said the big question, for now, is whether finished steel demand will remain strong enough to support the additional capacity that’s about to come online.
“With lots of capacity coming on in steel making there is a short term run up but then history will repeat itself and overcapacity will sink the steel and then scrap markets,” he said. “Cycles have become much closer and quicker to occur than before and I think we are destined for a correction some time mid-2021.”