US domestic scrap prices are expected to climb once again next month, and now some market player say they’re concerned about what will happen “when the bubble pops.”
“If the market implodes and the bubble bursts quickly, there are lot of scrap people who are going to be in trouble,” a source said. “In some regions, there hasn’t been a lot of scrap inflow and there hasn’t been a lot of foot traffic from the peddlers. I don’t know if it’s because of COVID, if it’s because of the holidays, or if it’s because of the weather, but lagging inflow is definitely helping to keep scrap prices up.”
A second source agreed. “If scrap prices correct, and they drop $100/gt, you can’t hide from that,” he added. “Prices shot up really high, really fast. Finished steel prices shot up really high, really fast. When finished steel prices swing back in the other direction, you can bet the mills will try to reduce their production costs. At some point, COVID will get better and [scrap] collection is going to improve. What goes up must come down.”
Another source is less concerned, adding that as long as steel demand is outpacing production, both scrap and finished steel prices are likely to remain strong. “There’s a lot of uncertainty for 2021,” he said. “Mills aren’t running at full capacity due to COVID, but automotive is running well. At some point, the market will correct, but for now it’s hard for the mills to keep up with demand.”
As with last week, sentiment as to how high scrap prices will climb in January remains mixed. Although some people think the market will trend up $30-$60/gt, others think the market could come up $50-$60/gt, “if not more.”