Ferrous scrap contacts in the US were surprised on Thursday morning to see a bevy of cancellations of secondary-grade orders from several steel mills in the south and southeast. Orders for prime grades were left unchanged.
It was surprising, as order cancellations usually occur when mills project lower scrap prices for the upcoming month and see an opportunity to lower their raw material costs in the short term. Late Thursday morning, some buyers reported that they had been trying to reduce their incoming scrap flows without success. They are confident that the market could accept a $10-20/gt price decrease for obsolete grades without significantly reducing their inflows.
Prime grades, by all accounts, appear to be untouchable in May.
The potential decreases in secondary grades extends to Canada as well. Sellers remain hopeful and view this strategy as a way for mills to try to put a lid on potential price increases for prime grades, shifting their efforts to salvage a sideways trend rather than seek higher prices. Sellers still believe several positive factors point to an upward trend.
Steel demand remains strong, and inventories at steel service centers are reported to be low, suggesting potentially strong steel production in the short term. The US steel sector’s installed capacity rate dipped below 80pc again last week (to 79.3pc), but all participants still consider it a good level. According to data from the American Iron and Steel Institute (AISI), consecutive weeks with an 80pc or higher capacity rate have not been seen since H1 2022.
Finished steel prices continue to rise, as hot-rolled coil (HRC) increased by another $15/nt this week. Nucor reported net earnings in Q1 476 percent higher than in Q1 2025, while their shipments increased by 20 percent quarterly. Steel Dynamics Inc. (SDI) reported a healthy quarter as well, with its net income almost doubling year-over-year and overall record steel shipments and higher average pricing.
Pig iron continues on its good run and increased $5/mt this week to $510-515/mt CFR New Orleans (NOLA). Yet all this is what is expected to help prime grades.
For secondary grades, buyers are saying flows are just too generous and need to be stymied somewhat. It remains to be seen if mills would be willing to increase the spread between #1 busheling and shredded if the former stays put and the latter falls. If the market accepts a $20/gt price decrease on the price of Midwest shredded, it would fall to $410/gt delivered consumer while #1 busheling would remain at $450/gt delivered (#1 bundles at the same level or $5/gt above busheling, depending on the market). That would separate shredded and #1 busheling by $40/gt after being at the same level all throughout the winter season.
Negotiations will take place next week after official announcements are made by the mills; none have been made yet.
