In our last report a week ago, SteelOrbis sources agreed that while an uptrend for December scrap prices was all but guaranteed, “up by how much” was the lone point of contention. Whereas some predicted prices could firm by $20/gt, others thought that up $30/gt was more likely. Today, most sources polled believe that up $40/gt is in the cards.
“There are a couple reasons or this. First, the [East coast] docks have raised their prices substantially,” a source said. “Turkey really seems to be driving the market."
In early-November, SteelOrbis reported that the dock delivered price range for HMS I/II 80:20 scrap in Philadelphia and New York was trending at $225-$235/gt. And while some sellers reported selling as high as $240-$245/gt, today, sources have confirmed the new dock price is “at or close to $265/gt.”
The uptick in dock prices is not surprising, another source added, noting that Turkish mills are expected to buy more scrap for December shipment than initially expected. Yet regardless as to why dock prices are going up, sources note that if domestic mills want scrap next month, they’ll need to raise their prices to compete.
One East coast source said he believes that come December, domestic HMS I prices in the Northeast could jump to $290/gt and that shredded scrap could climb to $315/gt. As a point of comparision, November scrap prices in that region settled at $250-$255/gt for HMS I, and $280-$285/gt for shredded.
Sources in the Ohio Valley say they’re aware of some yards that have already sold scrap at up $30-$50/gt above November settled prices to mills that needed immediate shipments. “If people are selling at up $30/gt now, you can just about guarantee that they’re going to come out higher than that once December gets here,” another source added.
A second component of December’s anticipated uptrend links to mills’ still-climbing capacity utilization rates. For the week ending November 14, the domestic capacity utilization rate reached 71.4%, which is a marked improvement from levels seen earlier this year. “Once the mills hit 75%, that’s when I think you’ll really start to see things rocking and rolling,” a source said.
Another thing to keep an eye on is Big River Steel’s recent expansion. Yesterday, the mill confirmed plans for an aggressive ramp-up to their rated capacity (3.3 million tons annually) in less than 5 months. Once rated capacity is reached, the mill will produce close to 5,000 tons of steel per employee per annum, which reflects a 66% jump from current production levels.
“Once Big River gets going, I think we’re going to see an all-out firefight [for scrap] between them and Nucor,” a source concluded. “I think we’re all waiting to see how that pans out.”