US domestic scrap prices could fall again in June

A weakening scrap export market, compounded by excess availability and the RG Steel shutdown could drag down US domestic scrap prices again next month. While RG Steel's liquidity crisis has been well documented in recent months, the sudden announcement that the company will idle all three of its mills shocked a number of scrap suppliers, who told SteelOrbis that if, as many expect, RG does not buy scrap next month, it will only further add to scrap's overabundance. There is already excess prime scrap in the Midwest due in part to a couple major consumers not buying domestic scrap the last few months, opting to use pig iron (which is currently being offered at $470/mt landed NOLA) and imported scrap from the CIS. US flat rolled steel prices have also been falling swiftly the last few weeks, which could incentivize mills to try to push down scrap prices in June.

Domestic shredded and HMS I scrap grades are also likely to be impacted by the RG Steel shutdown, but the recent drops in export prices will also take a toll. Turkey has been trying to source its scrap needs from Europe and still finds US prices too high in light of softening Turkish finished steel prices. Steel demand malaise in the Far East has also driven scrap export prices down from the US West Coast. Additionally, there are rumblings that one major Midwest shredded scrap consumer may not make any purchases next month. Another factor that could force scrap prices down anywhere from $10/lt to as much as $30/lt across the board is that with June the final month of the second quarter, mills reporting Q2 results may buy less in June in order to have leaner inventories for financial reporting purposes.