A strong sideways trend prevailed in May, as previously projected. Secondary grades trended sideways across most markets while prime grades improved by $20/gt from April settled prices, with a few exceptions. US mills came out aggressively last week, announcing measures to suppress any possible increase in obsolete grades, after sellers' opinions were heard that ferrous scrap is undervalued relative to finished steel prices.
Preliminary sentiment for June and the summer in general is that the market could remain sideways. Some contacts have mentioned that is the overal position of US mills, that they can purchase sideways during the summer season while trying to seek a price decrease for certain grades. Some mills will be entering maintenance shutdown during this period. Prime grades continue to be a separate part of the conversation, though, as mills battle in the Midwest for #1 busheling.
In the Midwest, the range for #1 busheling prices widened to $20/gt depending on the market. Early in the May trading cycle, prominent mills were seen buying the grade at an increase of $20/gt from April settled prices in the Cleveland and Pittsburgh markets, while in Chicago and Detroit the prices for the grade were left sideways. There were no efforts of mills in trying to lower prime grades as the positive run in finished steel prices has not allowed them to.
The price of hot-rolled coil (HRC) in the Midwest continues to grow. It improved from $1,117/nt in Mid-March to $1,177/nt as of last week. Additionally, the basic pig iron (BPI) market has also been rising, with this week a new, and rare, deal for low-phosphorous pig iron from Ukraine confirmed at $420-425/mt CFR New Orleans (NOLA), which confirms the price of high-phosphorous material from Brazil at $410-415/mt CFR, essentially a third consecutive week of price stability. But before that, BPI in the US grew by $20/mt in April and the same amount in March.
In April, obsolete grades fell by $20/gt in most markets while prime grades remained sideways. In May, prices for #1 busheling in the Midwest widened in range to $450-470/gt delivered consumer. Some participants have surmised that, given the grades' positive sentiment, prices in Chicago and Detroit could catch up in June. Shredded prices in the Midwest remained in the $430/gt delivered range, with only Cincinnati showing a slightly higher level at $440/gt delivered.
It should be noted that some buyers, in some instances those owned by steelmakers, were seen trying to impose a $20/gt price decrease on cut grades compared to April-settled prices. Those intentions were met with resistance by the sellers and ultimately those buyers relented. For machine shop turnings (MST) in Chicago and Detroit, mills reported no resistance trying to decrease the price by $10/gt from April due to smaller buys compared to previous expectations, as well as melt shops looking to be more efficient in their production turned their back on the lower yield grades like MST, HMS I and borings. This also caused HMS I to decrease by $10/gt only in Chicago, where the grade sits at $360/gt delivered.
The price range in HMS I for the Midwest is at $360-380/gt delivered, with Pittsburgh and Cleveland area prices in the higher end.
USEC
A positive trend in the export market helped keep prices in the domestic market on the US East Coast (USEC) relatively stable in May. Prime grades in the Philadelphia market increased by $20/gt as well, while all other grades remained sideways. Some participants in the area mentioned they did not think the rises were warranted, as purchases from local buyers were very limited this month, and traders could see the cost of their inflows increase as a result.
#1 busheling in the region grew in price by $20/gt to $450/gt delivered consumer in May, while HMS I remained unchanged at $345-350/gt delivered and shredded at $405-410/gt delivered.
The export market to Turkey had been growing in the past month, although some think it might have maxed out. Domestic steel prices in Turkey have been softening, as seen in rebar, merchant bar, and wire rod. A possible pause in the increase of ocean freight costs, a driving factor in the export market’s growth in the past weeks, could signal an end in the short term for more increases in Turkish import prices. Yet USEC participants at the docks remain cautiously optimistic, pointing out that Turkish mills will still need scrap for June, 20 cargoes are still needed it was reported on Thursday. The price of US-origin HMS I/II 80:20 grew in the past month to $414.5/mt CFR Turkey from $402/mt CFR at the start of the month.
