US domestic scrap sales in September encountered deeper losses than initially expected, down $30-43/mt versus August prices. Prime scrap encountered a deeper price erosion compared to cut grades such as shredded scrap.
As SteelOrbis surveys the market today, sources expressed expectations of sideways to downward trend for the October scrap trading period. One source said, “I think we can expect one more downward month in October, barring a shock event in the market, as supply is greater than demand at the moment.”
A separate source noted that given the tight export market on the East coast due to lower volumes and buying prices by Turkish mills, exporters are encountering a limited period of great buying opportunities, especially as most urban cities in the US are still producing scrap from demolitions and other sources which are less affected by the feedstock buying price at scrap yards. Additionally, sources noted the increased plant outages through October and November that would normally support prices but the subdued demand is expected to maintain prices at equilibrium.
The market uncertainty along with more dynamic operational models within firms is moving scrap sellers away from the monthly tender format to one where prices are adjusted frequently to reflect market conditions. A source on the East coast noted that his firm is changing prices every 2-3 days to make sure prices are relevant with updated export and domestic booking information. Additionally, due to the present excess supply of material, mill buyers are buying scrap throughout the month, thereby not placing as much competing pressure on volumes tendered the traditional first week of the month.
Given the excess scrap supplies, soft scrap demand from mills, and tepid economic outlook for the remainder of Q3 and Q4 2019, sources expressed an expectation of an additional price drop of $10-20/gt ($10-20/mt) on US domestic scrap in the early October scrap cycle barring an unexpected event.