Although October scrap trading is still a few weeks out, market sources believe that October prices “do not have any downside.”
“Winter is coming, car sales are decent, and with the crazy weather we’re having, it may be better for mills to get a bit of scrap on the ground now,” a source said.
Today’s snapshot of the market reflects a variety of positives. For example, North American light vehicle production is almost back to pre-COVID levels since July. “Although 2020’s annual vehicle production will be off, because April through June were deeply cut (and April automotive production was essentially shut down), sheet demand from automotive is strong,” another source said.
US finished steel pricing is also trending stronger-than-expected. In late August, as the expectation that an uptrend in September scrap prices solidified, mills began to send out price increase announcements. As many service centers had taken their inventories “a little bit too thin, while they figured out how bad COVID would be for their business,” finished steel order activity spiked.
Since that time, mill lead times have extended substantially. And, not surprisingly, most, if not all of mills’ desired price increases on flat rolled, structural tubing, and long products have been accepted. However, the recent run-up on finished steel pricing is likely to be short-lived.
“Service center inventory levels should be replenished toward the end of October,” another source added. “After that, we think that buyers will move back to the sidelines until after the first of the year. November is a short buying month, due to Thanksgiving, and with the year-end holidays taking up the last two weeks of December, activity is typically light.”
As such, it remains SteelOrbis’ prediction that cracks could start to emerge in the market as soon as late-October.
Also of note is that activity within Turkey’s import scrap market, which had been robust in the final part of August, has virtually disappeared.
“Turkey went on a buying frenzy starting over the end of August and wrapping up last week,” another source said. “This is normal: Turkish mills buy every ton of scrap they can get for [a few] weeks, then disappear for 3 to 5 months. This also causes scrap prices spike but then almost just as quickly, when Turkish mills disappear, [scrap prices] revert back to lower levels.”
On Wednesday, SteelOrbis reported that exporters in many regions, including the US, are insisting that price levels should be maintained at $300/mt CFR Turkey and above as domestic demand in their own markets is high.
“Against the backdrop, import scrap prices in Turkey may decrease slightly if a seller agrees to a deal at lower levels, while quotations are predicted to increase quickly to $300-305/mt CFR when Turkish mills return to the market at full strength,” our report said.
For now, however, the US scrap market is expected to trend at sideways to up $20/gt, depending on the grade and the region, as domestic mills still need to fulfill current orders.
“The shredders have raised their [peddler] prices, which is a positive,” another source said. “When [scrap] trading starts, maybe the market cools a bit and we only see sideways, but I don’t see any downside.”