For a third consecutive week, US domestic scrap prices for February delivery were forecast to potentially trade higher, market insiders told SteelOrbis in an exclusive weekly survey of market participants. With February largely staged to be the third straight month of domestic scrap price increases, next month’s buy-cycle trade action could be driven higher as a result of developing logistical issues for inbound and outbound scrap, following continued record cold weather, that was preceded by heavy snowfall and ice across more than 30 US states this past weekend.
Suppliers told SteelOrbis this week available supply “on the ground” in much of the Midwest, Northeast and parts of the Southeast remains snow covered, making shred processing operations more costly and time consuming. Some buyers have taken to buying scrap specifically in areas not affected by the storm, though many told SteelOrbis transportation of scrap to customers remains tricky.
“Domestically, we’re hearing [February] prices up $30/gt or more,” remarked one Nevada-based scrap supplier. “Right now, domestic scrap is stalled, even into the Southeast. As a result, buyers are having to reach as far south as Texas and Florida for shred supply.”
According to data from the Washington, DC-based National Oceanic and Atmospheric Administration, (NOAA), as of Jan. 28, about 51 percent of the US is covered by snow, up from 25.5 percent coverage one month prior. Some areas of the US that haven’t recently seen much snow like New Mexico, recorded as much as 31 inches of snow in the Sacramento Mountains.
“Not only are we seeing sharply higher scrap prices, but we’re also feeling it as well,” said another Ohio-based scrap broker. “There’s no question that scrap inflows have diminished to a crawl,” he said. “This will definitely affect the February market. At this point [Jan.28], we’re expecting to see a $20-30/gt increase.”
Ongoing discussions with US mills -many of which predicted an unchanged or “sideways” outcome versus January settles over the past several weeks- now finds higher pricing more likely.
“I’m thinking up $20/gt for February scrap,” remarked one US Midwest mill scrap buyer to SteelOrbis.
And, while it appears that near-term US scrap production will be more limited following the recent storm, scrap insiders said transportation issues are now emerging to the forefront as reports continue of interrupted deliveries as a result of scattered road closures, closed supply yards and downed delivery vehicles.
One Ohio-based scrap supplier reported his operation remains shuttered as a result of weather-related issues.
“We got 1-2 feet of snow here depending on where you are located in the region,” the supplier told SteelOrbis. “We are shut down,” he added. “It’s impossible to operate in these conditions while avoiding problems. With temperatures of 15 degrees [Fahrenheit] and wind chills of negative 20 degrees, hydraulics fail, diesel fuel gums up clogging fuel lines on our trucks, and if you have any breakdowns, you can’t work outside to fix things, so everything requires working in a shop in order to get done.”
As the storm, which was characterized as a “generational event,” in recent media reports moved across the US, an estimated 200 million US citizens were under weather-related alerts. A second US Northeast snow storm is possible this weekend, though the effects of this predicted “Noreaster” could be minimal, especially if more likely models calling for a more easterly track prove true, forecasters said. If the new storm moves further west, heavy snow is once again likely, otherwise, the storm is expected to bring mostly light snow and heavy winds, forecaster said.
“In my yard, you would never know that there is scrap sitting there,” the Midwest supplier reported when asked about operations going forward. “And, while we don’t have big inventories to begin with, our scrap is now covered by a lot of snow. The only way to uncover it is to move your scrap with material handlers and shake the snow off prior to processing and that cost time and money.”
“Although I remain less than 100 percent sure at the moment, I'm still hearing up $20-40/gt still,” said one Detroit-based scrap supplier.
Based on a conservative $30/gt increase in February scrap prices, US Midwest busheling scrap could settle at $445-455/gt ($452-462/mt), while February shredded material could settle near $445-450/gt ($452-457/mt). P&S and HMS scrap could settle near $431-441/gt ($438-448/mt), and $395-415/gt ($401-422/mt), respectively.
On the US East Coast, a $30/gt higher settlement could yield February busheling scrap prices near $400-420/gt ($406-427/mt), while February shredded scrap could finish near $395-405/gt ($401-411/mt). In P&S and HMS grades, a $30/gt higher settlement would yield a P&S scrap settle near $360-370/gt ($366-376/mt), while February HMS 80:20 scrap might settle in the range of $375-390/gt ($381-396/mt), on a delivered to export yard basis, market insiders said.
In the US scrap export markets, US East Coast export scrap contacts told SteelOrbis resistance to rising prices from Turkish mills continues, with some reported to be taking a step back from production by announcing the start of maintenance operations instead. Finished steel demand has not improved, they told SteelOrbis, and continues to exert pressure on import scrap prices.
