US domestic scrap market at a crossroads

After US domestic scrap prices dropped anywhere from $20-$45/lt throughout the Midwest and East Coast at the beginning of February, many were optimistic that prices could rebound next month, but that optimism has dwindled somewhat. On the busheling side, although raw steel production increased about 1.7 percent over the past two weeks, there is still a supply/demand imbalance. Many scrap dealers' busheling availability remains abundant due in part to an unseasonably warm winter that is fostering better scrap flow than anticipated. Additionally, less expensive pig iron ore from Brazil and the CIS may still decrease the amount of scrap flat rolled mills will need to buy next month, but not as substantially as the past two months because a freezing winter in Russian and Ukraine will likely put a cap on how much can be exported right now.

Meanwhile, the predicted trend for shredded and HMS I scrap is slightly brighter. The export scrap market, particularly from the East Coast to Turkey, has picked up in the last couple weeks and export prices have firmed, but only modestly--by about $8-$10/mt--in the last week. Cold weather in Europe is also affecting Turkish mills' availability to purchase less expensive ex-Black Sea scrap, and Turkey is forced to turn more to the US market for its scrap needs. But, an energy shortage in Turkey because of weather-related problems may also lessen the amount of scrap Turkish mills will need to buy in the next couple weeks. One way or the other, any movement in March scrap prices isn't expected to be significant.

In early February, US domestic scrap prices were as follows: