US ferrous scrap pricing for the month of October is now called mixed, with those expecting an Oct. 1 dockworker strike to occur at US East Coast and Gulf Coast port facilities calling for a weak sideways settle versus September scrap values, while those that think the strike can be averted call for October to settle sideways to strong sideways as export demand for containerized steel scrap will likely remain reasonably strong, market insiders told SteelOrbis this week.
The October outlook differs from the week of Sept. 16, when insiders said October scrap was seen sideways to higher, unchanged from a week earlier, as supply remained reduced at local scrap collection points, and fewer US steel making plants were expected to be offline for maintenance next month, resulting in improved scrap buying from mills, they said.
Recent reports indicate about 17 mills were in outage during September, with that number expected to drop to 14-15 mills during October, “which should improve mills’ demand for scrap,” market insiders said.
“There’s some trepidation starting to emerge in the East Coast scrap markets about the strike,” said one East Coast scrap market insider. “One of the things that’s keeping the East Coast scrap markets strong lately is exports. If that goes away with the strike, October scrap could be pulled down.”
Industry reports estimate that about 43 percent of all US imports, including containerized scrap, flow through the US East Coast and Gulf Coast ports currently subject to interruption should a dockworkers strike occur after the Sept. 30 current six-year contract expiration. Contract talks between the International Longshoreman’s Association (ILA) and the US Maritime Alliance (USMX) currently remain stalled, and the Biden administration still has no plans on tap to institute Taft-Harley to break up a strike should one occur on Oct. 1.
On March 15, 2020, Biden was endorsed by the ILA for president. While no new endorsement from the ILA could be found concerning the Democratic party this year, the executive board of the International Longshore and Wharehouse Union (ILWU), which operates on the US West Coast, recently has endorsed Kamala Harris for president.
Regardless of whether the strike occurs or not, insiders say “Scrap intake (at yards) remains way off,” with many expecting to see the mills emerge as larger buyers in October, because they will have fewer units off for maintenance versus September, “so they’ll need to buy more scrap.”
Recent industry reports indicated that about 1.8 million tons of steel making capacity will be offline from September to December as a result of planned maintenance outages. Many of these outages, market analysts told SteelOrbis, have been moved up 30-60 days this year so that mills can sell earlier into historically higher priced markets forecast by analysts to occur during the fourth quarter 2024 and Q1 2025.
“We’re calling the October market sideways right now, however, there’s a possibility for strong sideways if the strike doesn’t occur and exports out of the US East Coast remain strong,” another East Coast scrap insider said. “If the strike does occur and export demand is cut, the market could settle weak sideways to September, however, supply remains limited so if the mills come out as strong buyers, sideways pricing could still happen.”
Insiders said as demand for finished steel products such as appliances and automobiles continues to lag due to ongoing US economic conditions, contacts suggest tier I and tier II manufacturing capacity has been reduced by between 20-30 percent, thus, reducing the amount of available prime grade scrap normally generated by those sources. Sources added that the Sept. 18 Federal Reserve’s half-point interest rate cut, while positive, will likely take time to trickle down into improved demand level for finished steel and construction-related structural steel products.
Another SteelOrbis contact had a more optimistic opinion regarding the price of US scrap in the approaching 4th quarter. He said recent moves by the Chinese to stimulate their flagging economy could improve demand for scrap and structural steel.
“Scrap is unlikely to go down as we approach winter,” he said. “If the market feels bullish about the entire Chinese stimulus lasting more than a month, its unlikely that there's much downsides on materials or finished goods short term.”
Recently, the People’s Bank of China announced that the Reserve Requirement Ratio (RRR) would be reduced a half point in order to provide “much needed market stimulus.”
During the September buy cycle, Midwest prime busheling scrap settled at $355-375/gt ($361-381/mt) delivered to mill. September shredded scrap declined $20/gt ($22/mt) to $350-$360/gt ($356-366/mt) while September HMS#1 settled sideways at $320/gt ($325/mt). P&S scrap settled sideways for September at $345-355/gt ($351-361/mt) delivered to mill, insiders said.
On the US East Coast, September busheling scrap settled sideways to August at $350-385/gt ($356-391/mt) delivered to mill, while shredded settled sideways to August at $370/gt ($376/mt). HMS#1 and P&S scrap settled sideways at $290-315/gt ($295-320/mt), and $320-340/gt ($325-345/mt) delivered to mill, respectively, market insiders told SteelOrbis.