On Tuesday of last week, numerous scrap market sources throughout the US said they believed that domestic scrap prices had reached a ceiling. And while many believed that demand would remain strong into February, it was also pointed out that scrap inflows at January’s price points had begun to improve.
This week, however, nearly all sources polled said they believe the market will trend at strong sideways.
The shift in sentiment is linked to several factors, such as the recent stability in ex-US scrap cargo sales prices to Turkey, domestic mills’ still-robust need for scrap, and this week’s winter storm warning that spans from the Central and Southern US all the way up through the Northeast.
For example, on Monday of this week, SteelOrbis reported that an ex-US deal for HMS I/II 80:20 scrap was closed by an Izmir-based producer at $410/mt CFR. Although this marks a $7/mt CFR decline from ex-US scrap prices that took place in the first week of January, a number of ex-US bookings have taken place in the past several days.
Strong scrap demand from domestic mills coupled with slow-to-ship orders from January are also impacting the market.
“I am in the strong sideways group and some areas might even have to tick up if mills are ramping up for spring construction season,” a Midwest source said. “The damage [from Hurricane Ian, which caused between $50-$60 billion damage in Florida] and rebuilding is driving a lot of demand in the South. Couple that with an uptick of actual infrastructure spending I think we are sideways for the quarter with a strong possibility of an uptick to meet demand.”
Others agree.
“I’m leaning more toward up money in February,” added a source in the Southeast, noting he believes that the market could trend up $10-$20/gt once it settles. “I’m hearing that not all mills covered their positions when including restocking [in January]. I think demand is strong, and some of the winter storms coming over the next few days might slow down shipping to end the month.”
Earlier today, news outlets reported that heavy snow is forecast for states throughout the U.S. Nine states, including Arkansas, Illinois, Texas, Oklahoma, Missouri, Ohio, New York, Michigan, and Indiana, had weather warnings in effect as of 3pm Tuesday afternoon.
A second source in that region said he’s hearing that some people believe that busheling could trend up by $20/gt.
“It looks like strong sideways is the worst that can happen for February. Jan orders have shipped slowly and mills have asked dealers to ship faster,” he said. “Busheling is tight”
Looking to the Ohio Valley, a source in that region said he too had heard that mills didn’t buy as much prime scrap as they needed, adding that this week’s winter storm could also play a role in February pricing.
“The yards [in this region] don’t have the scrap to support the demand,” he said. “If the market wants to stay sideways, then I would think we see prime going up and shred and cuts staying sideways in Feb. I don’t see any indication the market is going down. Dealers are not scrambling for increased positions this month which is a good sign for the market to go up.”