Despite many optimistic predictions that the US and world prices for scrap would strengthen until summer, the record high prices prompted increased scrap collection, as well as weaker buying activity, causing the market to undergo a major correction in April.
After registering increases every month since January, scrap prices came down for the first time since the beginning the year. All major scrap-consuming markets registered some decreases as well. In total, US scrap prices have dropped approximately $30 - $45 /long ton within the last couple of weeks.
In the first week of April, busheling scrap dropped an average of $30 /long ton, shredded scrap dropped by an average of $45 /long ton, while HMS I and II decreased at an average of $20 /long ton. Current East Coast busheling prices range from $330 - $335 /long ton, while shredded goes for $310 - $315 /long ton. HMS I now ranges from $280 - $285 /long ton.
Scrap prices have come down significantly, though scrap demand is not all that weak, and demand for end-products is still decent. The downward movement in scrap prices is a correction to the soaring prices observed in the preceding months and also a reaction to the high inventories which started to accumulate with the arrival of spring. Seeing that scrap prices are slipping, scrap buyers are holding back from purchasing this month, generating a temporary period of weak demand.
Some market players are concerned about how the drop in scrap prices will affect finished product surcharges and are paying close attention to see if the largest US steel producers, such as Nucor, will lower surcharges for May deliveries of longs and flats. So far, steel buyers are not expecting any price decreases from US steel mills.
However, this may change if scrap prices soften again in May. Some scrap traders are predicting that prices might soften another $10 - $15 /long ton in May. However, imports could certainly save the day. Turkish mini-mills, which are large consumers of American scrap, may play an important role in determining the fate of the US scrap market. Turkish buyers have been pretty quiet for the past few weeks, but they are expected to resume their large purchases soon. If exports pick up again, scrap yards may be able to maintain their prices into May and June.
For exports, April shipments are now taking place to Turkey and Greece from the East Coast, though it is unclear if there will be many May deliveries. Pricing for completed offers of US scrap to Turkey dropped $18.50 /mt when compared to our last report two weeks ago. SteelOrbis is informed that a Turkish mill concluded a booking of a single cargo of scrap ex-US towards the end of last week for early May shipment. The cargo is composed of HMS I/II 80:20 scrap, booked at $349.50/mt CIF Marmara, shredded scrap booked at $354.50/mt CIF Marmara and PNS booked at $359.50/mt CIF Marmara.