The most recent forecast published in late May by SteelOrbis for the US domestic scrap market pointed toward a sideways to strong-sideways outlook for June scrap trading. Several sources noted the possibility of slight inventory overhang in regions that could result in soft-sideways pricing, but overall expectations were of limited price movements.
Sources now inform SteelOrbis that as mills are facing lower prices on finished goods, some mills are reportedly being heard discussing offers of a scrap price erosion of $10-20/gt ($10-20/mt) compared to May's settled prices.
An East coast source stated today, “June US domestic scrap was looking optimistic, but that has also dissipated along with higher bulk export scrap prices.” A separate East coast source noted that his firm had to increase scrap buying prices on scrapyard feedstock in late May in order to ensure adequate scrap flow into the yards, which he believes may limit the success of the downward pressure by mills by the time prices settle later this week.
A Midwest source noted that given the seasonal effect on inventories and market prices on finished steel, the mill-led decline on scrap prices may succeed this month, but hopefully, may see an upward trend again in July and into August. He added that finished steel prices dropping to late 2016 levels has rattled the market, and the decline will limit the ability of scrap prices to remain at level or increase in the next few months.
A second Midwest source referenced a recent interview by Lourenco Goncalves, CEO of Cleveland-Cliffs, who noted service center inventories were low and the cycle of lower US domestic finished steel prices and scrap prices happens in June and July annually. Goncalves forecasted stronger US steel prices in H2 2019 that will support raw material prices.