Sources close to SteelOrbis believe that the three-month run up in scrap prices may have come to an end.
The January buy cycle started off robustly, sources note, adding that while the average price in January was up $30/gt ($30/mt) across the board, some early buys happened at up $35/gt ($36/mt). On the other hand, sellers who held onto their scrap and sold late were only able to get up $20/gt ($20/mt) pricing from mills.
At this point, sources agree that the run up in scrap prices is unlikely to continue, and that “soft-sideways” pricing is likely for February. Declining East coast export prices, coupled with less-than-exciting finished steel demand, are among the reasons a soft-sideways market is expected.
“The dealers that I’ve talked to have been trying to move as much as they could this month because they think things are going to come down in February,” a source said. “In the absence of some sort of black swan event, I don’t know if the market can stay where it is.”
And while some had hoped that export activity off the East coast would start to pick up, which in theory could have bolstered February scrap prices, news today that HMS I/II 80:20 prices off the East coast are down by $13/mt CFR compared to levels seen in early December has dampened that sentiment.
“We think the market could come down $10/gt ($10/mt),” another source said. “But you have to remember that down $10/gt really won’t make any waves. At this point we need to see what the big players do in February, because David Joseph and Nucor are going to set the market, and everyone else will fall in line.”
Another source was a bit more pessimistic, citing a belief that prices in the Midwest could tick down by as much as $20/gt ($20/mt); however, other sources disagree.
“The market is running out of steam, but I don’t think it’s lost enough steam to warrant down $20/gt,” a source said. “I think some of the mills overbought this month, and when you account for that, and the fact that February is a shorter month, I think soft-sideways is the safe call.”