Participants in the US domestic ferrous scrap trade have raised expectations for May, with the outlook shifting to a strong sideways trend. Several factors influencing the US scrap market have continued to improve in recent days, fueling bullish sentiment. At worst, many expect no movement in May, while a downturn in any grade does not seem to be considered.
Specifically, some think a $10/gt ($9.8/mt) increase in cut and prime grades is possible. Some buyers have started inquiring about prime grades this week.
The factors
Among the positive factors is the current spread that exists between finished steel and scrap prices. In the US Midwest, the price for hot-rolled coil (HRC) sits at $1,050-1,055/nt ($1,157-1,163/mt) ex-US mill with a potential to go up even further before the week is over, and #1 busheling is valued at $450/gt ($443/mt) delivered consumer. This represents an approximate spread of $700/mt, whereas the usual spread has been closer to $400/mt, prompting participants to comment that scrap is undervalued. The price of hot-rolled plate (HRP) has also been rising by $90-120/nt ($99-132/mt) over the past few weeks.
May trading is still at least ten days away, expected to begin on May 4 at the earliest, but recent bullishness is coalescing around other factors, such as the positive trend in US basic pig iron (BPI) over the past three months. The price of high-phosphorous material has grown by $20/mt in each of the last two months. In mid-February, the price stood at $460/mt CFR New Orleans (NOLA); by mid-March, it had climbed to $480/mt CFR; and currently, in mid-April, it sits at $500-505/mt CFR. This is another significant boost for US scrap prime grades. For their part, Brazilian producers have been finding bullishness in their market from strong finished-steel prices and robust BPI demand. It should be noted that this year they opened a new trade route to Italy, broadening their commercial options.
SteelOrbis has also reported brisk activity in the export market, both from the US East Coast (USEC) and the US West Coast (USWC). Export activity to Turkey picked up this week as the price of US-origin HMS I/II 80:20 improved by $4.5/mt this week to $404.5/mt CFR Turkey. Import prices to Bangladesh for bulk scrap also rose this week, even if import prices for containerized scrap have decelerated. Yet prices to the docks have not improved during this time, with uncertainty in global freight and energy prices preventing exporters from increasing their costs of inflows. The price of HMS I to New York and Philadelphia docks has remained at the $280-290/gt ($276-285/mt) delivered export yard for some weeks now. In that regard, domestic consumers should not be too worried about competition from the export market; on the contrary, contacts have mentioned exporters need to improve their prices (some have ventured to say by $40-45/mt) to compete with the domestic market.
Lastly, the US steel sector’s installed capacity utilization rate finally broke the 80 percent threshold, and there it sits for the last reported week, according to the American Iron and Steel Institute (AISI), a level not seen since Aug 2024. This also has contacts indicating a significant scrap appetite among US mills.
On the downside, some mills and sellers report that abundant shredded material is available in the US. The grade’s price contracted by $20/gt ($18.6/mt) delivered mill to $430/gt ($423/mt) delivered in March. And that, overall, scrap flows are good due to the improved Spring weather.
The strong sideways outlook will be revised over the next two weeks, prior to May trading.
