US scrap prices fall – Market adjustment or new trend?

While scrap consumption is still decent, the summer months are usually a period of slowdown, and this summer is no exception, as the US market has seen prices for shredded, busheling, and HMS scrap decrease significantly this month. After auto bundles went down by approximately $100 /long ton at the beginning of the month, shredded and HMS grade scrap both fell approximately $40 to $45 /long ton, and busheling fell $60 to $65 /long ton. Scrap yards have since pushed back on the amount they are offering, and prices have rebounded by $5 to $10 /long ton in the past week. The average price for Heavy Melt Scrap (HMS I) now ranges from approximately $195 /long ton to $205 /long ton, and HMS II ranges from $190 /long ton to $200 /long ton. Shredded now ranges from $230 /long ton to $240 /long ton, while busheling goes for $270 /long ton to $280 /long ton. Despite the drop in pricing, experts say that the decreases were more of a market adjustment than an indication of a downward pricing trend. Most experts concur that scrap prices had been over-inflated for the past six months, and are finally coming back down to earth. Also, more scrap is collected during the summer months, and inventories are larger than they have been in the past few months. Still, inventories are relatively slim compared to previous summers, and demand is still good. The pricing trend is expected to remain flat to slightly down for the next couple months, but once the winter months come around, prices should firm up again. The world scrap market is still relatively quiet, and it will be hard for export prices to rise much with price weakening for long products worldwide and the decrease in US scrap prices domestically. While scrap exports from the US were sky-high in June, there hasn't been much interest from the European or Asian markets in US scrap offers since US scrap began to weaken at the beginning of August. Experts say that these markets are waiting to see if US prices will decline further before booking any major tonnage. However, Turkey, a major importer of US scrap, has seen a decline in their quantities for export, and is looking at US offers. As reported by SteelOrbis, last week a Turkish mill concluded a full shredded scrap cargo booking ex-US at $262 /mt CFR Marmara Sea Port, while the same mill has concluded another full-shredded scrap cargo booking from another US supplier at around $261 /mt CFR Marmara Sea Port. Still, export prices to Turkey for both shredded and HMS may drift further down, as the mill sales to traditional Turkish markets are still weak. In general, the export pricing trend is slightly down because of the price depreciation in the US market as well as the decline in finished product prices. Also, during the summer months, there have been no weather-related shipping problems that would affect the world supply. Although export statistics for July and August are not yet available, recently released June export statistics from the US Customs data show us some new trends in the scrap export market. Statistics show that Malaysia's imports of HMS 1 and 2 as well as shredded scrap from the US have increased dramatically from March to June. Thailand has presented itself as a larger importer of shredded scrap from the US, while China's shredded imports have dwindled down to 0. Turkey has continued to be a large consumer of both HMS and shredded scrap from the US. USITC data shows that during the month of June, the top recipients of HMS 1 and HMS 2 grade scrap from the US were: Malaysia, at 91,000 mt; Turkey, at 72,000 mt; and Egypt, at 36,000 mt. The top recipients of shredded scrap from the US were: Mexico, at 88,000 mt; Turkey, at 71,000 mt; Malaysia, at 63,000 mt; and Thailand, at 57,000 mt. The sub-total for all US scrap exports during the month of June was 949,000 mt, the highest monthly total for the year thus far.