US domestic scrap prices are expected to rise during next month’s buy cycle, but sources close to SteelOrbis have alternate opinions on how much prices will rise.
“I’ve heard up $20-$30/gt for the past couple of weeks, but I don’t think up $40/gt would be out of the question,” a source said, adding that while some Southern states, such as Mississippi and Texas, saw disruptions due to the ice and snow, other states, such as Ohio and Pennsylvania, are more accustomed to inclement weather and were thus better prepared. “I know that a lot of the scrap yards have raised their [peddler] prices by $10-$15/gt this week, which should help bring people in.”
An Ohio Valley source said he believes that January-level prices are “a slam dunk,” adding that higher prices will be attributed to several factors, such as rising export sales prices, increased demand, and weather-based disruptions in scrap collection.
“We’re already seeing P&S scrap in Pittsburgh being sold at $425/gt for barge shipments to the South, and that puts P&S scrap at up $40-$45/gt right there, and we’re not even into March yet,” he said. “I think we’ll see up $50/gt on cut grades. As for shred, there just isn’t a lot of shred out there and the shredders are already raising their numbers. A lot of them still owe on February orders.”
Also, of note, sources said, is that many mills are still in need of scrap. “The mills I talk to don’t have a lot of inventory, and mills that had all kinds of scrap on hand at the end of January are down to the ground,” one source said. “JSW is supposed to be starting up again on March 10, so they’re going to have a large program, and I know of another mill that’s behind on its program. A fourth mill that I talk to plans to buy more than double what they’ve been buying next month, so that’s going to help push prices upward. Not to mention that automotive [production] has been slowing down because of this chip shortage, so I sense that could push busheling scrap up by $20-$30/gt.”
Earlier this month, it was reported that a shortage of computer chips caused Ford to slow production of its F-150 for a week, and General Motors had to temporarily shut down its Fairfax, Kansas plant. Tesla today announced it will halt some production at an assembly plant in California, adding that their production line would be paused through March 7. Although Tesla has not commented as to the reason for the pause, the carmaker had previously stated that the global semiconductor shortage could cause a temporary impact. A report from IHS Market predicts that globally, more than 672,000 fewer vehicles will be produced in Q1 2021 due to the shortage.
A third source said that while the mills he talks to have said their inventory is “pretty good,” they’re still putting on orders because they need more scrap.
“I’ve heard up $20-$40/gt for next month, but I don’t think that up $50/gt is unrealistic,” he said. “It’s a wide range that we’re looking at and who knows where this merry-go-round is going to stop. But I guess we’ll all find out next week.”