After a tumultuous two months, market players in the US Midwest, Ohio Valley and East coast believe that US domestic scrap market prices have bottomed.
And while some believe that the market will trade at sideways during the November buy cycle due to lackluster demand for finished steel, others believe that lessened scrap inflows, which are a direct result of low sales prices, will force the market upward.
One Midwest source described the current state of scrap inflows as being “nonexistent.” East coast sources, however, say that while flows aren’t “nonexistent,” they are down by about 25%.
Trying to determine which November price theory is more accurate is a matter of interpretation, sources say.
“I think both theories are correct,” a source said. “I don’t see any additional downside to the market. Mills’ outages this month meant they had small buy programs, which is ultimately what knocked the market down by $30-$40/gt ($30-$41/mt) in October. Since we expect that mills will be back to their normal production levels in November, we think prices are poised to firm.”
Another source agreed. “The mills no longer have 2-3 months of scrap on the ground,” he said. “If mills increase their buy programs, and if export prices to Turkey stay where they are, I think prices will go up.”
Market players throughout the US believe that at worst, scrap prices in November will trade at sideways to up $10/gt ($10/mt), and at best, the market will be up $20/gt ($20/mt). It’s also been heard that mills have quietly come back into the market this week because they failed to buy sufficient quantities of scrap at the beginning of the month.
Another bright spot for the market, sources note, is today’s announcement that General Motors and the United Auto Workers (UAW) union have reached a tentative deal to end a five-week strike. However, it’s not currently known when workers will start returning to work. A statement from UAW indicates that a decision will be made on Thursday as to whether workers will return before the agreement has been ratified. Ratification of the agreement, UAW states, could take a week or more.