The fate of December scrap prices is “still up in the air,” sources note, adding that lessened steel production coupled with unexciting buyer activity has the potential to push US scrap prices down further.
“[Scrap inflow] is slow, [and the] weather is getting cold, but mill production has dropped into the low 70% range so they don’t need scrap,” a source said. “I think they will push it down one more month, run out all of their inventory and restock after the new year when we have a better picture of the economy.”
For example, the American Iron and Steel Institute (AISI) yesterday reported that for the week ending November 12, mills capacity utilization rate was recorded at 73.7%, against 82.8% during the same reporting period in 2021. In terms of the US economic outlook, a mid-2022 CNBC survey of chief financial officers at top US companies found that 68% of respondents believe that the US will fall into a recession during the first half of 2023.
A Chicago-based source agreed that the market has more downside than upside.
“All I’m hearing is that the market is still [pointing] down and we may see further drops in December,” he said. “Demand is still off and mills don’t want to give away their [profit] margin.
Lackluster demand, especially in the sheet steel sector, was underscored last Friday in our US domestic HRC report, which noted that HRC prices had dropped another $1.00 cwt. ($22/mt or $20/nt), week-over-week, to an average price of $33-$36 cwt. ($728-$794/mt or $660-$720/nt), FOB mill. This is the lowest that US HRC prices have been since late-November 2020. Sources continue to report that lead times for hot rolled coil are “at or below 4 weeks.”
On the other hand, others believe that despite the above-stated factors (and despite the fact that the most recent ex-US HMS I/II 80:20 cargo price into Turkey fell to $343/mt CFR), some believe that December scrap prices could trend sideways.
“I must believe we are at the bottom,” added a source from the Ohio Valley. “Inbound [flows] of obsolete scrap have slowed and will continue to slow as the weather worsens.”
A source from the Southeast agreed.
“I don’t see pricing increasing in December,” he added. “I think [mills’] order books are still way off and export has started to fall after being in the $350s mt CFR-range for what seems to be multiple months. I’d put myself firmly in the sideways camp at this point.”
“I think if prices go down again into December that there won’t be too much excitement from sellers,” a final source added. “I imagine they’ll take a look around their yards and say ‘it’s cold, we only have two weeks to work this month [due to the year-end holiday season], and if we decide to move scrap it will be at the bare minimums.”
Additional clarity is expected to come by mid-next week.