January US domestic scrap prices are expected to rise between $20-30/gt ($20-30/mt) across cut and prime scrap grades for January delivery once monthly supply negotiations are completed later this week, scrap market insiders told SteelOrbis.
Following higher December buy-cycle scrap negotiations, which saw US Midwest scrap prices rise $10-20/gt across all scrap grades, an anticipated $30/gt increase for January material would mean prices for US Midwest shredded scrap have risen nearly 14 percent since the conclusion of November scrap negotiations. Midwest busheling scrap values during the same time period will have risen a less robust 7.7 percent, SteelOrbis data shows. And, if current January scrap price expectations prove true as January markets begin to settle, the current spread between Midwest shredded scrap grades and busheling scrap will stand at just $2/gt, off from about $12/gt at the conclusion of December negotiations. Many scrap insiders told SteelOrbis during weekly scrap surveys in December that the shredded/busheling spread at more than $10/gt was “in need of correction.”
Late reports from SteelOrbis contacts indicate the latest plus $20 determination for January prime Midwest scrap could be in contention.
“I’ve heard that there is pretty good resistance [from suppliers] to plus previously stated $20/gt price increases for Midwest busheling,” noted one Midwest scrap broker at press time. “Larger yards want plus $30/gt.” At press time, the majority of SteelOrbis survey respondents remained at plus $20/gt for prime Midwest scrap, though that might change.
Market insiders told SteelOrbis the continued paucity of shredded material in supply yards was a direct result of cold and snowy weather in major US scrap producing regions, the result of a developing La Nina weather pattern.
At last report, 30-day weather forecasts from the US National Weather Service indicate the US Midwest and Northeast regions could see a continuation of colder and snowier weather during the period, which could continue to reduce supply inflows and delay or cut scrap delivery. As a result of La Nina, much of the US Southeast and Southern US regions are forecast to experience warmer and drier weather, NWS said on its website. Longer-term three-month NWS forecasts indicate a return to more normal temperature conditions, though the precipitation outlook for the key US Midwest, where much US steel is produced, is seen above normal, while the Southeast and South could see below normal precipitation and higher than normal temperatures.
Based on a $30/gt ($31/mt) increase for domestic US Ohio Valley shredded scrap, January shredded material is likely to settle at $415-420/gt ($422-427/mt). January prime busheling, at an average $20/gt gain at press time, could settle near $415-425/gt ($422-432/mt), though late trade negotiations could see the price higher. In cut grades, January HMS I/II is seen settling $30/gt higher at $365-385/gt ($371-391/mt), while P&S scrap could see another $30/gt bump toward $401-411/gt ($407-418/mt).
In the US Northeast, scrap market insiders told SteelOrbis that continued strength in local Midwest scrap markets is decreasing flows to US East Coast export docks, even as export demand for US scrap abroad remains reduced.
“We’re hearing that flows to US East Coast export docks are on the low side due to this ongoing increase in Midwest scrap prices,” noted one Northeast scrap insider. “As a result, Schnitzer Steel is raising its East Coast dock pricing.”
Based on an average $20 increase for US Northeast HMS I/II scrap, January material is likely to settle near $335-350/gt ($340-355/mt), while January P&S grades could see settles near $330-340/gt ($335-345/mt), the result of another $30/gt monthly price rise. On primes, January US Northeast busheling scrap could settle near $370-390/gt ($376-396/mt), up $30/gt, while shredded grades might close the month $30/gt higher near $365-375/gt ($370-380/mt), market insiders said.