October scrap prices settled less than a week ago, and now, many within the market have turned their sights to the next buy cycle, which will start in just over two weeks.
“It will be interesting to see what happens in the next two months once mills start coming back from their outages,” a source said, pointing to numerous planned maintenance outages that had been scheduled to take place in the last 4 months of the year. “I’m not hearing any downside to the market, and if anything, I think that prices could go up. The mills that are coming back online are going to need scrap, and if you think about what the weather is like in November and December, and how the snow and cold weather impacts [scrap] flow, I think that’s also going to factor into things.”
Other sources also believe that scrap prices could be on the verge of an uptick.
“I’m not hearing too much talk about sideways and if anything, the people I’ve talked to think the market is positive on all fronts,” a second source added, noting that dock prices on the East coast appear to be ticking upward.
For example, yesterday, SteelOrbis reported that although the dock delivered price for HMS I/II 80:20 in Philadelphia was being heard at approximately $355/gt, sources believed that quiet deals may be available to certain sellers, based on volume, in the range of $365-$370/gt. That suspicion, they said, was largely tied to recent upticks in export scrap cargo sale prices. Scrap prices in Turkey are also still going up, with the most recent cargo of HMS I/II 80:20 scrap, sold by an Ex-Estonia seller, was concluded at $480/mt CFR.
(Shortly after publication, SteelOrbis' Istanbul office confirmed that that a US-based seller sold a cargo of HMS I/II 80:20 to a Turkish steelmaker at $486/mt CFR, which will likely lead to higher dock prices in that region.)
“I think if Turkey gets back up to $490-$500/mt CFR range for scrap, that things could get more interesting,” the source continued.
Others believe that there would be “nothing exciting” about a sideways market, adding that if prices don’t go up, that some scrap yards might be reluctant to sell until after the first of the year.
“If you look at what typically happens in the last two months of the year, you have hunting season, you have the cold weather, and you have the holidays, but there’s a fourth thing that’s worth mentioning this year that people haven’t been talking about,” another source added. “Everyone every scrap yard in the country, has made a ton of cash this year and now, all these companies are scrambling to make large purchases and to update their equipment, even down buying new computers, before the end of the year, because that will help reduce their taxable income. People can hold off on selling and still record a hefty profit for 2021. I don’t see any benefit for companies that sell at sideways—it just means they’ll need to pay more in taxes.”
As far as how much upside the market could have, sentiment is largely mixed. Whereas some believe that shredded scrap, which settled at roughly $450-$455/gt in the Ohio Valley and Northeast, could tick up to $470-$475 next month (with similar upticks seen for other scrap grades in this region), others believe that that only mills that will pay higher prices next month, are the ones that took prices down during this month’s buy cycle. Others point to still-strong demand for finished steel, still-strong finished steel prices, and continued challenges with labor, trucking, and transportation.
“I wouldn’t be surprised one bit if we saw the market at up $50/gt by the end of the year,” a final source added. “Whether that’s $20/gt this month and $30/gt next month, or it happens all in one fell swoop, that’s the only question I have.”