The trend for US domestic scrap prices next month is largely uncertain, as sources throughout the US have mixed views over what might happen in March.
“It’s the $64,000 question,” one East coast source said, referencing a 1950s quiz show that aired on US television, in which contestants could win up to a $64,000 grand prize if questions were answered correctly.
“Export seems to be falling apart. Dock delivered prices out of Philadelphia are steady, but there’s a lot of speculation that HMS I/II 80:20 dock prices could come down another $10-$20/gt ($10-$20/mt) in the upcoming weeks.”
Although one Turkish source mentioned a rumor that US dock delivered prices may fall from $190/gt ($193/mt) to $160/gt ($163/mt), East coast exporters disagree, noting that “prices that low would kill inflow.”
“Inflow is already off, and if domestic mills decide to get cute and try to take the market down another $20-$30/gt ($20-$30/mt) in March, I think that’s going to cause additional problems,” the source continued, adding that he predicts that domestic scrap prices could come down by another $10/gt during next month’s buy cycle. “I don’t think anyone believes the market is going up.”
Sources in the Midwest, however, have a different take on the market.
“Inflow into our yards is still pretty good, which is surprising,” one Midwest source said. “But I have heard there are problems in other parts of the country, and that the shredders might have a tough time completing this month’s orders because they don’t have enough inflow. My sense is that the market has bottomed. I definitely don’t see the market jumping up in March, but I don’t see it going down, either.”
Another source disagreed, saying he thinks that the market is about to take a turn for the positive.
“I think the market will be steady to up,” he said. “Mills that usually don’t call me are calling me for busheling, which tells me that we could see some firming on prime grades. I think we could see some grades settling at up $10/gt next month, and if not next month, I think it will happen in April.”
Although sources largely differ in regard to their expectation for March, they do agree that the landscape will likely be clearer next week.
“It’s just too soon to make any predictions right now,” another source commented, adding that “it’s not at all unusual for the direction of the market to change on a dime. We also have no idea of how the China effect will play into next month’s pricing.”
Multiple SteelOrbis sources expressed interest in how the Wuhan coronavirus outbreak might impact Chinese rebar production, and whether this would improve demand for Turkish rebar, which in turn could bolster demand for US export scrap.
Turkish sources say while this is certainly plausible, at the moment it seems unlikely, noting that earlier in the week it was reported that China’s finished steel demand has been dented significantly due to the coronavirus outbreak.
“If steel consumption in China decreases more than production drops, China will aggressively sell rebar to the export market, which means that Turkey will have no chance to increase its sales to Asia, because our production costs are higher,” the Turkish source said. “On the other hand, if Chinese production drops too much, it’s likely that Turkey will be selling more [rebar] to Hong Kong and Singapore. But don’t forget that Persian Gulf countries, such as Omar and Qatar, will be selling there too, and they have lower freight costs compared to Turkey. For now, I would say that it’s premature to assume that the ‘China effect’ will have an immediate impact on US export scrap demand.”