Mexican ferrous domestic prices fell for the second week as mills try to offset higher freight and energy costs. Moreover, a presumed downturn in the US domestic ferrous scrap market for April has allowed Mexican mills to lower their levels. During this two-week period, some mills have recorded price contractions of MXN900/mt across all grades, while others have implemented decreases of MXN300-400/mt.
The decreases have been observed in the Northern, Central, and Bajio regions of the country. Busheling I in those three regions of the country settled at MXN7,800-8,000 ($436.4-$447.6/mt) delivered, a decrease of MXN300/mt ($10-22/mt) week on week. In the state of Veracruz, mills have been reported as buying the grade in the MXN8,300-8,400/mt ($464-470/mt) delivered range.
According to Mexican contacts, scrap demand is solid, and mills continue to seek tonnages, but they are not expected to raise prices and will instead supplement their volumes with scrap imports. It is reported that they want to dispel the uncertainty surrounding short-term price increases and decreases; no corrections are expected. Besides, participants are aware that higher busheling prices will not necessarily generate more scrap, as industrial accounts are limited in the volumes they can procure.
P&S 5ft has been close to busheling prices; this week it decreased by MXN200/mt ($6/mt), settling at the MXN 7,700/mt ($430.8mt) level in the Bajio region, and reportedly being bought by Veracruz mills at MXN8,300/mt ($464.4/mt), both delivered. In the Central region, some mills were seen purchasing machine shop turnings (MST) as high as MXN6,750/mt ($378/mt), down by MXN300/mt ($11/mt) from last week.
It will be interesting to see where Mexican and US prices land at the end of this month. In the US, a $20/gt ($20.3/mt) downturn is expected for secondary grades, while primary grades are projected to remain unchanged. Mexican scrap prices have been above US prices for two months now, and considering Mexican mills have to compete with the export market and not allow too much scrap to leave the country, they are expected to remain competitive in pricing.
That spread is already slim, compared with Northern Mexico’s $447/mt delivered for busheling I, Houston’s sits at $441/mt delivered, and further decreases for the Mexican grade could continue while US primes remain sideways. Yet historically, a $100/gt ($101.6/mt) spread between Mexican and US prices, in favor of US prices, has been the standard.
The weekly changes shared on dollar-basis were calculated by considering the fluctuation of the Mexican peso-US dollar exchange rate.
1 = MXN18.11 (Mar. 27)
1 = MXN17.87 (Apr. 3)
