Market prepares for another US domestic scrap price drop

Even before US domestic scrap prices settled for June, predictions abounded that scrap prices would fall again in the beginning of July. Those predictions are now pointing to a minimum drop of $15/lt to as much as $30/lt drop next month. While the magnitude of the decline isn't yet certain, a decrease next month is all-but-guaranteed. Supply of both obsolete and prime scrap grades is still outpacing demand, due in part to a less active export market the last couple months as well as smaller scrap buys from domestic mills. Similar to June, a few mills are expected to abstain from scrap purchases altogether in July, due to a combination of planned outages and lackluster demand for both flat rolled and long products.

US domestic flats prices are still softening, and with prices not expected to recover for at least a few more weeks, flats mills will likely try to push busheling prices down next month. As for HMS I and shredded scrap, there is an overabundance of scrap in the market which is only being exacerbated by a few mills still using imported scrap rather than purchasing domestically. Further, ex-US East Coast scrap prices to Turkey have softened throughout the month amid inactivity, while export scrap prices from the US West Coast to the Far East have also declined due largely to an extreme slowdown in steel demand. Already, some industry insiders are predicting a neutral domestic scrap move or even an increase in August, but it will depend whether prices fall substantially enough next month that a bottom is reached--right now, domestic mills are testing a bottom, according to one East Coast scrap dealer.

US domestic scrap prices in early June were as follows: