US scrap market “less optimistic” than it was last week

Monday, 18 May 2020 22:53:20 (GMT+3)   |   San Diego
       

On Wednesday of last week, SteelOrbis sources agreed that scrap prices were likely to trend up during the June buy cycle. The reason for that, sources noted, was tied to a widespread belief that demand for finished steel had started to improve.

For example, automotive and manufacturing plants, which had been shuttered since the start of the US’ shelter-in-place orders, announced they had already started, or had plans to restart production.

This week's sentiment, which is still more positive than it is negative, has taken a slight turn for the worse. And while the new consensus is that scrap prices are likely to trend at strong sideways, with most within the market shifting to a belief that prices will be up by $5/gt ($5/mt), as opposed to last week’s belief that June would be up by $10-$15/gt ($10-$15/mt), a handful of “doomsday prophets” warn that market prices could tick downward.  By how much, they say, is anyone’s guess.

“Demolition work hasn’t stopped and there are a lot of people who would, in normal times, hold scrap until prices are higher. We’re concerned there’s going to be a lot of people who sell, at whatever price they can get, to can get cashflow for things like payroll and rent,” a source said. “Peddler business has started to pick up, inflow is better, and we’re worried that supply is going to completely outpace demand. If supply and demand aren’t balanced, this could force prices down next month.”

Source on the East coast say they agree that supply-demand models could be “out of whack,” and say they are monitoring the situation closely.

“We definitely don’t want to be holding inventory in a down market. If we think the mills are going to try to take things down, we’ll cut our [peddler prices] to stop the inflow,” he said. “We do not want to take in 7,000-8,000 tons of scrap if we think we can’t sell more than 4,000-5,000 tons. If the market goes down $20-$30/gt ($20-$30/mt), you won’t be able to hide from that.”

Mills’ demand levels for next month’s buy cycle is also in question.

One source described scrap demand for mills in the Pittsburgh, Youngstown and Cleveland areas as being “totally dead,” another source described scrap demand in that region as being “anemic.”

“We’re also keeping an eye on things because we don’t want to be caught with our pants down,” he said. “If mills’ demand is flat, or even if it goes up by a small amount, if our inflow is up by 10-15% that’s going to hurt us. We will absolutely cut our [peddler prices] if we need to.”

Another source said that while he doesn’t see any downside to pricing next month, that “anything can happen between now and then. I mean, if you asked me during the middle of February if life as we know it was going to be cancelled for God only knows how many months, I would  have told you, you were  crazy. It’s only the 18th and a lot can happen between now and June.”

Although SteelOrbis sources seem split on their predictions for June pricing, what they do agree on, is that prime grades “will absolutely remain in short supply.”

“Yes, the automotive guys are ramping back up but it’s not like busheling flow is going to bounce back to where it was,” another source added. “Busheling [prices] for next month will be determined by two things: how many people have it, and how desperate the mills are to get it.”  

 


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