The outlook for May domestic scrap pricing in the US continued lower this week as reduced exports abroad as a result of global steel tariffs and burgeoning domestic supply continues to depress price expectations for May buy-cycle scrap negotiations which will begin next week, market insiders told SteelOrbis.
Insiders said the availability and use of cheap billet from Asia continues to reduce scrap demand from Turkey and other steel producing nations, even though lead times on the product are significantly longer from Asia. Insiders say new carbon targets in the international steel industry are causing mills to focus on EAFs instead of traditional blast furnaces, which could increase the need for scrap and in some regions lead to plans that may end up in measures curbing scrap exports in the long term.
“We are dealing with very difficult markets right now,“ said one Midwest scrap broker. “As you know, the major weakness for US scrap seems to be in export,” he said. “US mills are still running pretty good, though they are currently (full of) scrap. This is the reason for the declines, especially for Midwest shredded grades.”
While the insider added that he expects the domestic scrap markets to stabilize in June, further declines for May shredded scrap are possible, given paltry domestic and global demand.
“It’s very possible that Nucor could continue to push scrap prices even lower for May as they like to take advantage in these types of markets,” he said. “There’s really no telling just what they might do.”
At last report, May shredded scrap is expected to settle $40/gt ($41/mt) less than its April counterpart at an estimated $375-380/gt ($381-386/mt) on a delivered to mill basis. Since shredded prices peaked recently following the March buy-cycle at on average $439.50/gt ($447/mt), domestic shredded scrap prices have declined on average 9.32 percent to a current $398.50/gt ($402/mt).
In other domestic steel scrap grades, May prime busheling scrap is seen $20/gt ($20/mt) less than its April counterpart at $445-470/gt ($453-478/mt) delivered to mill, while cut grades HMS and P&S are seen about $30/gt ($30/mt) less at $335-355/gt ($340-361/mt), and $371-381/gt ($377-387/mt), respectively, scrap insiders told SteelOrbis.
“There’s decent demand from the mills for May scrap, but there’s just too much inventory,” said another Midwest scrap dealer. “Shred is down $40/gt for going on a second month.”
“Scrap dealers are asking us to take more scrap,” said another Midwest steel mill scrap contact. “There’s really strong inbound flows of scrap into yards right now.”
While it remains early in May Northeast scrap discussions, insiders told Steel Orbis that reduced export demand for HMS 80:20 scrap, in lieu of billet use by Turkey, is likely to cause May cut grades to decline about $40/gt against their April counterparts, to about $305-320/gt ($310-325/mt) on a delivered to mill basis for HMS, while P&S could settle at or about $295-305/gt ($300-310/mt), scrap insiders said. Busheling is seen settling $20/gt ($20/mt) less at $390-410/gt ($396-417/mt), while shredded grades are likely to settle near $325-335/gt ($330-340/mt) delivered, insiders said.