Ferrous prices for the domestic market could remain sideways for next Monday, when the July trading cycle begins after the 4th of July US Independence Day holiday. Scrap demand remains healthy as finished steel production remains high and steel prices keep rising. On the other hand, scrap supply flows are adequate, with some contacts considering material availability as plentiful, which has placed the downward pressure on the market that has preserved the balance.
It should be noted that steel production in the US has been robust but dipped last week. According to the American Iron and Steel Institute (AISI), last week the steel sector’s installed capacity utilization rate dropped to 79.8 percent from 80.2 percent the previous week, ending an eight-week run above 80 percent. Production last week reached 1.84 million nt, not much different from 1.85 million nt the week prior, so the recent dip is not an end to the steel sector’s positive run.
Possible downgrade for cuts’ prices
The prices for cut grades are facing more pressure, though. The export market keeps softening on both coasts. In the USEC, uncertainty abounds, and prices keep dropping. Turkish scrap demand has been lagging, and available cargoes are reported as numerous, with 15 cargoes allegedly being offered to the mills (six alone from USEC). The latest deals from the UK/EU into Turkey for HMS I/II 80:20 have been at the $368-369/mt CFR as of Thursday. On Thursday, there is also an unconfirmed report from the Netherlands at $368/mt CFR Turkey. The market is constantly changing, but this could place the price for US material at $376-379/mt CFR Turkey, a decrease of $5-8/mt with the latest deals. As reported by SteelOrbis, it is unclear if the market has reached bottom.
Cut grades in the USEC markets could be particularly susceptible to going down in price, given the prominence that exporters have on local demand. In the Philadelphia market, for example, exporters consume close to 1 million gt of scrap every year, compared with the largest mills in the region that can reach consumption of 240,000gt annually. The situation was exacerbated by the permanent closure of Cleveland-Cliffs’ Steelton, Pennsylvania, site last year, which also reportedly consumed close to 240,000gt of scrap every year.
This has allowed prices at the docks to lag significantly compared with the domestic market. The price of HMS I to the Philadelphia docks sits at $260-270/gt delivered export yard, compared to $350/gt delivered Philadelphia consumer. In this context, scrap business stakeholders in the region project that cut grades could decrease by $10-20/gt by next week.
In other markets, the spread between the export and domestic market prices is not as pronounced. In Houston, for example, the prices of HMS I to the docks are at $340-345/gt delivered export yard, slightly below the $355/gt delivered consumer price used by the local mills. Yet the mills in the Houston area, in this case, exert more influence on scrap demand than the docks do. Still, even as this week Houston dock prices remained unchanged (Houston dock prices move slowly), traders mentioned that they expect dock prices to fall soon given the downward pressure seen in the USEC and US West Coast (USWC). In the latter, the rainy season and higher energy costs have pressured down Asian rebar prices, curtailing scrap demand and also causing prices at USWC docks to fall continuously in recent weeks, both for bulk and containerized scrap.
