Ferrous scrap prices for the month of February in the US Midwest are now seen settling $30-40/gt ($33-43/mt) higher as recent cold weather and snow has caused inventories at both mills and suppliers to plummet, market insiders told SteelOrbis this week.
This week’s scrap call differs from that seen during the week of January 27, when the February scrap market was seen at least $20-30/gt ($22-32/mt) higher.
“Mills are bone dry on inventory, it’s the worst I’ve ever seen it,” commented one major US Midwest scrap market supplier. “Scrap prices are likely to continue to rise until mills get invested levels back to a healthy place. I’m thinking it’s a sellers’ market for the next 60-90 days.”
One limiting factor that may keep February scrap prices from rising much more could be that many US mills are still owed delivery on their contracted January scrap, which has yet to be delivered due to weather-inspired problems with scrap processing equipment over the last several weeks combined with transportation problems as travel on interstate highways became difficult as a result of recent snow and ice storms.
Scrap insiders also report problems with the movement of scrap on the Illinois River in and around the Chicago scrap markets, as transit will be limited due to ongoing maintenance work on locks by the US Army Corps of Engineers.
“Mills are still owed January scrap. In some cases, substantial amounts are still due,” said another US Gulf Coast scrap market insider. “So, in such cases, mills are in no hurry to jump back into the scrap market.”
“Yes, we are still owed January scrap,” confirmed one Midwest mill insider, noting a lack of interest at the moment in February supply. “We’re hearing the markets are $30-$40/gt ($33-43/mt) higher.”
Market insiders confirmed that many mills are “late to the game” in purchasing February scrap requirements. At press time, February scrap trades were reported at $40/gt ($43/mt) premiums for shredded and prime grades, while cuts were heard done at $30/gt ($33/mt) premiums.
“It seems a little corrupt to me,” said the Midwest scrap supplier. “I can’t believe that (the mills) are stretching this thing out. The markets are clearly up $50/gt ($53/mt) in my opinion.”
No reports in excess of $40/gt higher ($43/mt) were noted as of press time, though markets could continue to trade February material until the February buy-cycle ends early next week.
Based on an average of the $30-40/gt increase for February scrap, Ohio Valley HMS 1 could settle at $375-395/gt ($381-401/mt) delivered to customer, while shredded scrap could settle at $430-435/gt ($437-442/mt) on a delivered basis. P&S is likely to settle at $420-$430/gt ($427-437/mt) delivered to customer, while prime busheling scrap could settle at $445-470/gt ($452-478/mt) delivered to customer.
On the US East Coast, based on the latest plus $20/gt ($22/mt) February scrap price increase, HMS 1 is expected to settle near $355-370/gt ($361-376/mt) delivered to customer, while shredded is likely near to $385-395/gt ($391-401/mt) delivered. P&S is seen at $355-365/gt ($361-371/mt) on a delivered basis, while prime busheling scrap is likely to settle at $410-430/gt ($417-437/mt) on a delivered to customer basis.
According to the US National Weather Service, temperatures over the next 8-14 days are seen more moderate with normal to above normal temperatures forecast across much of the South and Southeastern US, while near normal to below normal temperatures are forecast for the Midwest and Upper Midwest. Precipitation in the Midwest and Upper Midwest is seen above normal across much of the region, while the South and Southeast US is projected to see near normal to below normal precipitation.