On the heels of continued record cold weather and amid reports of scant mill inventory, domestic ferrous scrap prices are likely to trade at least $30/gt higher this month, continuing an upward pricing trend that began three months earlier in December, market insiders told SteelOrbis this week.
Following on recent record snowfalls across more than 30 states affecting more than 200 million Americans, this week’s unseasonably low temperatures and spotty snowfall reports are making the transport of scrap a higher priority, insiders said. Key scrap transportation routes like rivers and roads continue to be affected, they said, while demand for trucking assets to move scrap remains at a premium.
Even in markets as far away as the US West Coast, February scrap prices are heard at $25/gt premiums.
“Shredded scrap is up $30/gt at [Gerdau’s’] Cartersville,” said one Midwest scrap supplier as trade for obsolete grades HMS and P&S began in earnest February 4. “The market appears to be coming together at plus $30/gt across the board,” said another insider to SteelOrbis later that day. Another scrap insider reported additional sales by suppliers to Midwest mills at plus $30/gt.
If February buy-cycle scrap settles begin to be reported on February 6 or at the latest early next week as expected, a $30/gt February scrap price increase would mean that US Midwest shredded scrap values have increased nearly 16 percent since finishing at $385-390/gt ($391-396/mt) at December settlement. Over the same time period, US Midwest busheling scrap will have increased 12.5 percent, SteelOrbis data shows. HMS and P&S grades will have risen more than 17 percent and nearly 16 percent, respectively.
Monthly scrap trading this go-round finds US domestic mills more receptive to rising scrap prices, indicating to some insiders that many may have let in-house inventory get too low.
“From our standpoint, shipments are going reasonably well given the recent weather, however, markets will be up for February as demand remains solid,” remarked one US Midwest mill scrap buyer, prior to the start of February trade. “We’re expecting prices to be $20-30/gt up.”
Suppliers countered that the overall pricing outlook for February was now seen more consistently higher, versus even week-ago levels. Some predicted February pricing could increase to $30-50/gt premiums, depending on how extensively mill inventory had been depleted.
“Domestically, we’re expecting to see premiums approaching $30/gt or more,” remarked another Rocky Mountain-based scrap supplier to SteelOrbis.
One Ohio-based supplier reported recent freezing of Lake Erie as well as key portions of the Ohio River had stalled barge-related scrap deliveries by as much as three full days, and that trucks alone would have little chance of being able to make up an expected delivery shortfall, at least early in the delivery cycle.
“I believe the Ohio River is frozen which is slowing the delivery of barges of scrap way down,” he said. “This should increase demand and prices for prompt scrap in February, and suppliers are optimistic that there is a strong possibility of them seeing pricing in the plus-$30/gt to plus-$50/gt range. Right now, the talk is up $20-30/gt (Feb. 2), but I think its likely to settle at plus $30/gt to plus $50/gt minimums. This weather is handicapping everyone.”
This week saw an interesting development in monthly scrap discussions as trucking executives reported to SteelOrbis continued winter weather across the region was prompting some trucking concerns to forego their usual scrap deliveries, in lieu of better fees payable for the prompt delivery of road salt to combat a continued onslaught of snow, ice, and cold.
“On the freight side we have been engaging with better-paying salt customers because demand has been very strong this winter,” a Midwest scrap supplier remarked. “The rates that salt buyers are offering are awesome for the trucks. They are much better than scrap, which is never the case,” he added. “Salt demand is the highest it’s been in a very long time which is taking available truck capacity away from scrap.”
Based on a current $30/gt increase in February scrap pricing across all grades, 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 boost at 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). For P&S and HMS grades, a $30/gt higher settlement could yield a P&S scrap settle at $360-370/gt ($366-376/mt), while February HMS scrap might settle in the range of $375-390/gt ($381-396/mt), on a delivered to export yard basis, market insiders told SteelOrbis.