Last week, scrap market players throughout the US were firm in their stance that August prices would settle at sideways. This week, however, more than half of those polled say they believe that down $10-$20/gt, across the board, is more likely.
“There’s a lot less confidence this week, unless Turkey shows back up and does something miraculous,” a source said.
However, in that it’s been recently reported that Turkish mills have started to ask for lower quotations, and that their desired price for cargoes is below $400/mt CFR, that miracle is highly unlikely.
“If there’s some sort of reawakening [in term of export demand and export pricing], great, but the other thing you need to take into consideration is that the domestic mills haven’t been buying enormous volumes,” the source continued.
“It’s still summer—the domestic mills haven’t been buying [a lot of scrap], export has been lagging, and there’s still an oversupply of scrap. If sideways does happen, it would be because there’s some sufficient resistance. It wouldn’t be an easy win for the scrap yards.”
A second source agreed.
“I’m more bearish than I was last week, and I tend to agree with [down $10-$20/gt across the board] now,” he added. “I’m thinking soft-sideways for sure.”
Another point to consider, a third source said, is the fact that US domestic HRC prices are still trending downward. As of earlier this week, HRC spot market prices fell to roughly $44-$45 cwt. ($970-$992/mt or $880-$900/nt), FOB mill, which is the lowest it’s been since December 2020.
Several sources speculate that HRC prices could settle at or below $42.50 cwt. ($937/mt or $850/nt), FOB mill.
“In addition to the scrap overhang, sheet steel prices are still falling,” an East Coast-based source pointed out. “The mills are going to want to preserve every bit of margin that they can.”
Others, on the other hand, still believe that the market will settle at sideways.
“Yes, export [prices have retreated] and dock prices still aren’t great. But down $10-$20/gt? I don’t buy it,” the source said. “I’m telling you that the drum is being beat at sideways. Maybe primes could come down but that’s about it. In Buffalo, NY, the shredders are empty. Scrap just isn’t coming in. I don’t know who has an oversupply of scrap. In my area, I’m just not seeing it. The guys I know are scrambling to fill orders.”
A final source said he also believes that August prices are unlikely to come down, noting that the yards he works with don’t have a lot of scrap on the ground.
“The yards are empty so less will be offered for August,” he added. “The [heat wave that’s plaguing many parts of the country] is having an impact, as well as high fuel costs. [The mills we work with] are still showing strong [melt] schedules so I think it’s a sideways market regardless of how they come out.”