Ferrous scrap prices for the US domestic market in August could move similarly as they did in July. The overall consensus is that another month of stability will prevail, with scrap demand still substantial as the steel sector maintains high production levels. Yet some abundance in select grades could lower their prices again. Specifically, contacts in the Midwestern and Southern regions believe a drop of $10/gt for shredded and HMS I could coalesce while all other grades could remain sideways; essentially, the same trend in July.
The lid stays on primes
Market fundamentals for prime grades remain strong, yet factors are offsetting any potential price increase. The installed capacity utilization rate for the steel sector dipped below the 80pc threshold for a couple of weeks in July (the weeks of Jul 11 and 18), then bounced back last week to 80.5pc, and has overall been a few percentage points away from 80pc since the start of April, according to data from the American Iron and Steel Institute (AISI). The price of hot-rolled coil (HRC) continued to grow in July, reaching $1,169.7/nt ex-US mill this week compared to $1,129.7/nt ex-US at the start of the month (futures are at the $1,196/nt level).
By comparison, rebar, which utilizes more HMS and shredded for manufacturing as opposed to prime grades, went down to $919.8/nt FOB truck ex-mill from $939.8/nt FOB during the same period.
Yet a recent resolution regarding import tariffs on pig iron has made this raw material more attractive for mills, if and when they do not have easy access to direct reduced iron (DRI). In July, pig iron was excluded from the US Trade Representative's (USTR) list of tariff exemptions, which made the material susceptible to a 25 percent import tariff. In the case of Brazilian pig iron, it would be added to an already existing 10 percent blanket tariff on their products. But after negotiations between US industry organizations, US authorities, and stakeholders from Brazil, pig iron was added to the tariff exemption list.
Pig iron deals to the US, which had been dormant while traders awaited the tariff-related outcome, resumed right away with a hefty price drop. A 50,000mt cargo was sold at $500-505/mt CFR New Orleans (NOLA) from S. Brazil, dropping from a $530/mt CFR NOLA level before the trade policy negotiations.
This has automatically put downward pressure on prime grades. Additionally, it remains to be seen how Big River Steel's DRI production at its new plant in Arkansas can influence the metallics market (and prime grades, eventually) given it will be producing in the millions of metric tonnes annually. The plant is expected to begin production in 2029.
This week, a turnaround on both coasts
Another significant development this week was in both export markets on the US East Coast (USEC) and US West Coast (USWC). Even though market fundamentals, and specifically, rebar prices and demand have not improved in either Turkey or Asia, higher ocean freight costs (or the prospect of those costs increasing) have made US exporters aim for higher offers. In the case of USEC, the price of HMS I/II 80:20 recovered in the past week to $375-376/mt CFR Turkey with the latest deals, while current USEC offer levels are heard at $380/mt CFR. And in USWC, the recent turnaround is so fresh that even though containerized HMS I/II 80:20 was stable at $305/mt FAS Long Beach port on Wednesday, there are confirmed deals on Thursday at $318/mt FAS. This dispels some projections of a market bottom being at $300/mt FAS.
It remains to be seen if this could help cut grades' prices for the domestic market. Some contacts mention that, except shredded, other grades of obsoletes that are sent to the export market are not fit for domestic consumption. Yet others mention this is not such a clear-cut scenario, as not all of the export material is not fit for domestic mills; some is.
