US settled scrap prices: What we know about this month’s downtrend

In mid-June, scrap dealers started to think that a pricing downtrend was on the horizon. Although automotive production had picked back up, the psychological impact of the coronavirus was still taking a toll on demand for manufactured goods. Some believed that negative factors within the market, such as the still-higher-than-normal domestic unemployment rate, climbing COVID-19 infection rates and the fact that it was heard that some mills still had plenty of scrap on the ground, served to counterbalance the positive signs.

As the end of the month approached, it was largely held that prices were poised to come down across the board, although “down by how much,” was a matter of contention.  Some predicted soft-sideways to down $10, others thought that busheling could come down by $30-$40/gt ($30-$41/mt).

While there seemed to be early indicators that in some places some scrap grades might trade at sideways, the final numbers reflect a downtrend.  Sources in the Southeast are also reporting that busheling settled at down $40/gt, with other grades settling at down $20/gt. A similar trend was seek in the Chicago market, although there are reports that HMS traded at down $10-$20/gt, as opposed to down "a flat $20/gt."

The downtrend is attributed to several factors. First, is that finished steel prices have started to soften. The second factor, sources note, is that the export yards lowered their dock prices, which caused East coast yards to sell scrap inland. The third factor relates to mills’ buying less than what was anticipated.

“The mills in the Northeast didn’t buy much,” a source said. Another Midwest-based source noted that a mill in his region has taken a month-long outage.

“Before every holiday weekend a lot of the scrap yards try to posture,” another source added. “They’ll say there’s not a lot of shipping days in the month and they’ll try to sell buyers on the idea that scrap is going to be scarce. So, it’s not unusual to see more favorable signs before a long holiday weekend. Some mills buy into that line of thinking, while most others hold off until after the holiday. Post-holiday pricing can be a lit different than it was before the break. That’s what happened this month.”

July’s settled scrap prices are listed in the chart below. However, it should be noted while the price ranges listed in the chart are representative of the most commonly heard ranges, there have been some “outlier deals” that have taken place outside of the reported ranges, that are not fully representative of the  market.  Further, busheling prices in the Northeast are estimates, as mills did not purchase standard busheling grades this month.