US domestic scrap falls beyond expectations in June

In late May, SteelOrbis reported on expectations of mostly a sideways price movement for the early June scrap trading week. Early May sentiment was that of a potential decline outlook for June, but scrap prices seemed to be getting support from the export market as Turkey made import scrap purchases at improved prices after the US announced the reduction of the Section 232 tariff rate from 50 to 25 percent. The excitement quickly dissipated as the scrap volume buys were not realized and the market began to be skeptical of Turkish mills’ ability to increase production rates significantly.

Additionally, US domestic finished steel prices on both flats and longs have faced strong downward pressure in the past few weeks. As the trading week began, scrap yards braced for downward pressure of $10-20/gt ($10-20/mt). Unfortunately, mills were much more aggressive and achieved a national consensus of a $30/gt ($30/mt) decline on US domestic scrap prices this week compared to May settled prices.

Several sources informed SteelOrbis that the decline in prices will result in lower buying prices for feedstock at scrap yards which should help scrap reach supply and demand equilibrium.

A rebar producer in the Midwest informed SteelOrbis that service centers have been working through inventories, hence, the low buys from mills but that the situation is expected to normalize again by August. Additionally, given the overall market uncertainty financing terms and client payment cycles will continue to be “tightly watched.”

A large scrap dealer in the Midwest noted the likelihood that mills are working toward lower operating rates as lead times have shrunk on flat roll to 2-3 weeks. He stated, “Talking with steel buyers and producers there is a consensus that the market is looking for a floor on prices.”

*Top number denotes a change from the bottom of the range and bottom number change from the top of the range in mt.

**East coast range was not reported in May for change comparison.