US Midwest scrap market not yet settled, but “big shift in pricing” may emerge

In mid-March, scrap market sources throughout the US were highly optimistic about possible price trends for April.  The sense of positivity was based on a variety of factors, including rising sheet steel prices, high pig iron prices, and rising cargo prices into Turkey.

At that point, some believed that prices for HMS, P&S, and shredded scrap would rise by as much as $50-$100/gt during the next month’s buy cycle, and others thought that primes could firm by $100-$200/gt once the market settled.

Yet toward the end of the month, sentiment, while still positive, was slightly less bullish, as cargo prices into Turkey appeared to reach an equilibrium.

 “Last week, when a lot of us were thinking that [domestic prices] could shoot up by as much as $100/gt next month, we also thought that cargoes into Turkey could climb to $680/mt CFR or higher, which clearly hasn’t happened,” a source said on March 31, adding that most predictions had revised to up $40-$50/gt on HMS & P&S, up $70/gt for shredded scrap, ad up $100+/gt for primes.

But this week, once the buy cycle began, however, buyers seemed to have some alternate ideas.

For example, yesterday, multiple sources confirmed that DJJ was testing the market at up $85/gt for primes, at sideways for shredded scrap, and down $20/gt for HMS and this morning, Northstar came out at down $20/gt for HMS, at sideways for shredded scrap, and up $75/gt for primes.

“This happened so quickly, but [I think] the best explanation that I see is that the increased scrap prices over the last couple months have led to very strong flows in most parts of the US,” a source said.  “There was a lot of secondary scrap being offered.”

Other sources said they believed that perhaps some mills “bought heavy” on pig iron last month, which led to a diminished need for prime grade scrap in April.

“It’s just a preliminary suspicion, but that’s the best I can come up with,” a second source said.

A third source said that other factors, such as higher peddler prices, more favorable weather, and the fact that the docks “haven’t gone crazy raising their prices” may also be impacting the market.

Midwest scrap prices haven’t settled yet, sources said, adding that lots of sellers, “and I mean LOTS of sellers, are not happy about what they’re hearing.”

Pricing in the Northeast, however, has settled at sideways across the board.

Northeast settled scrap prices are listed in the chart below. Midwest settled prices are expected by the end of the week.