A previously looming rail strike that had the potential to disrupt US supply chains, including scrap deliveries, has been averted after the Biden administration brokered a deal between the rail workers unions and the railroad companies.
Although the union members still need to vote on the deal, it’s expected that the deal will be ratified.
Sources close to SteelOrbis say they believe that this will directly impact scrap pricing in October. Earlier in the week, SteelOrbis reported that the lone possible upside to scrap prices next month would have been a disruption to the supply chain. In that any such disruption is no longer expected, scrap prices are now expected to trend down.
“I think sideways would be a godsend,” a source said, noting that while scrap prices are “way off,” that scrap demand from mills is expected to be “less than stellar” due to unexciting order activity.
For example, lead times for US domestic HRC are trending at approximately 4-5 weeks, while lead times for US domestic CRC and HDG coil are still hovering in the range of 6-7 weeks.
Also, of note, is that the deadlock between exporters and Turkish mills is “still alive and well.” An Istanbul-based source noted that while US sellers’ expectation for HMS I/II 80:20 is that cargo prices should bottom out in the $350’s/mt CFR, Turkish mills have alternate opinions.
“Mills [in Turkey] are saying that HMS I/II 80:20 scrap cargo prices below $300/mt CFR would be competitive,” the source said, noting that some mills in that country are still voicing the possibility of further production cuts due to soft rebar prices.
Whether Turkish mills will be successful in purchasing ex-US cargo prices at that level has yet to be determined.
Other US-based sources have said that news that US Steel has idled its No. 8 blast furnace at their Gary Works steel plant, which was reportedly done due to “market conditions,” has caught their attention.
“Demand for finished steel doesn’t seem to be great right now and we expect this will put downward pressure on the market next month, “ a source said. “This could be further augmented if Turkey reduces their buying prices.”
Additional clarity as to the direction of US October scrap prices is expected to come by the end of next week.