Finished steel prices may still be rising, but multiple sources close to SteelOrbis say they believe that US domestic scrap prices are poised to soften.
“Export activity off the East coast has been mostly quiet,” a source said, noting that prices for recent cargo sales into Turkey, from other sellers in the global market, have been ticking downward. “Scrap inflows are still pretty good and in the absence of export activity, I don’t think any of us would be surprised if prices came down next month. On the other hand, I imagine it’s going to be really tough for dealers to [accept lower prices] when they see that finished steel prices are still going up.”
Mills’ profits keep going up too.
In a press announcement released earlier today, Nucor said that all three of its operating segments are “continuing to generate robust profitability,” adding that their Q2 quarterly consolidated net earnings were recorded at $1.51 billion, against Q1 consolidated net earnings of $942.4 million. The mill also said it expects earnings in the third quarter of 2021 to be the highest quarterly earnings in Nucor history.
“I never thought that just because mills are selling steel at higher prices that they’d willfully throw money at the scrap dealers. They’d rather keep it in their pockets,” an East coast-based source added. “But from our standpoint, we dropped our prices by $10/gt at the end of last week and even with that, our intake is still very good. We’re planning on taking prices down again because we’re trying to bake in [an anticipated] $20/gt drop for next month, but we’ll see how the flow goes once that happens.”
Another source agreed that mills will push for down $20/gt during next month’s buy cycle.
“Regardless as to the price of flat rolled, if mills see an opportunity to take prices down $20-$30/gt, they’re going to take it,” he said.
A final source offered an outlying opinion.
“Any softening [in scrap prices] should create an immediate drop in new steel sales value, and that’s the last thing mills want,” he said. “I think they’ll begrudgingly go sideways so they don’t have to tell their customers that they are just putting more margins in their pockets. Reporting record earnings [while also taking down scrap prices] probably won’t play well.”