LME – U.S. scrap prices will drop by $20-$30 in November

LME - U.S. scrap prices will drop by $20-$30 in November

By Bryan Berry

Ferrous-scrap prices in the United States will drop by $20-30 per gross ton from October to November, scrap executives are predicting.

On the East Coast, executives are predicting that prices will drop by $25-30. Yesterday, 30 October, Upstate Shredding-Ben Weitsman & Son (Owego, N.Y) sold “huge tons” of scrap to Nucor subsidiary David J. Joseph Co. at down $30 from October levels, company owner Adam Weitsman told this morning. Upstate sold shredded scrap at an estimated $329 FOB Owego in October (down $20 from the prices in August and September); down $30 would take the price of shredded to $299 FOB Owego in November.

Steel Dynamics Inc.’s Columbus, Miss., mill is buying 14,000 tons of shred at down $30 from October levels, one scrap executive in the Southeast told On the other hand, one East Coast scrap company sold the obsolete grades (No. 1 heavy melt, shredded scrap, and 5-foot plate and structural) at down $20 (from October levels) to mills in the Northeast, “and we felt very happy about it,” said a company executive.

The weak export market and the strong U.S. dollar are two reasons that scrap prices are falling, executives say. If the export market for scrap to Turkey were strong, the U.S. steelmakers would have to compete with Turkey for U.S. scrap; but that’s basically not happening now.

A good number of the steel mills will be needing scrap in November, most scrap executives say. AK’s mills in Dearborn, Mich., and Middletown, Ohio, will need to buy a lot of scrap, one Cincinnati broker says; so will Nucor and SDI’s Indiana mills.

The U.S. steel industry used 76.3 percent of its capacity in the week ending 25 October; the capacity-utilization rate has held steady in the mid to upper 70s for the past several months. “The steel mills are running well,” said one northern Illinois scrap executive.

Also, the foundries are running very well. Waupaca is running every other weekend, one scrap executive reported in the middle of October. The foundries are looking for good-quality scrap, said another executive.

However, one southeastern scrap executive is seeing signs that the mills’ order books may have weakened. And the inventory of scrap at the steel mills is good, meaning that some mills may not need to buy a lot of scrap in November.

The supply of obsolete scrap has tightened in the past month. “The flow of inbound scrap into our yards has dropped dramatically in the past month,” said one Illinois executive. The tighter supply may limit the price drop for obsolete scrap in November

If prices do go down by $30 for most grades, the flow of peddler scrap into the scrap yards will diminish greatly, one midwestern scrap executive says. Also, the buyers of steel will expect the U.S. steelmakers to drop the price of finished steel, in line with the drop in scrap prices. And the steelmakers will not want to do that.

Some scrap companies will hold back some scrap in November in the hope that scrap prices will rise in January or February 2015. “In November, scrap companies with deep pockets will hold back their scrap until January,” the Cincinnati executive said.

“I’m not convinced that the market really is down by $30 in November,” he said. The steel mills, particularly Nucor’s David Joseph, may be pushing it down by that much, but this may severely restrict the flow of scrap into the yards—plus the steel mills may not want to lower the price of finished steel. This may be the bottom of the current market cycle, he says.

But most scrap companies will ship their scrap this month, other executives say; more scrap companies are likely to hold back scrap in December than in November, one executive said.

Another factor is the weather. Temperatures dropped into the 30s (Fahrenheit) in Chicago today (31 October); snow showers are predicted for this evening and tomorrow. If the Midwest gets a winter anywhere near as cold as the winter of January-February 2014, that will pressure the steel mills to pay higher prices for scrap.

Steady flow of pig from Brazil; the situation in Russia and Ukraine

The steady flow of pig iron from Brazil also is weakening the demand for scrap in the United States. Pig-iron producers in northern Brazil currently are shipping 140,000 metric tons (tonnes) of scrap to the U.S. per month; pig producers in southern Brazil, another 20,000 tonnes, one pig-iron executive says.

And the price of Brazilian scrap loaded onto the barge in New Orleans has dropped by $8/tonne in the past month, from $415-$420 to $405-$415.

Nucor is buying about half of the 160,000 tonnes of pig coming into the U.S., executives say. Other steel mills, including SDI (mainly Columbus, Miss.), Nucor Gallatin, North Star Blue Scope, Charter, and Republic, are buying about 60,000 tonnes of that; foundries, about 20,000 tonnes.

Russia recently has sold one or more cargoloads of pig to the United States. About half of that will go to Nucor; half to the U.S. foundries.

Ukraine currently is shipping no pig iron to the United States as it deals with the invasion of their country by Russia and Russia’s supporters. In 2013, Ukraine shipped 489,000 metric tons (tonnes) of pig iron to the U.S. Russia shipped 1.9 million tonnes to the U.S.; Brazil, 1.8 million tonnes (see news article, “‘Strong Sideways’ U.S. Scrap Market in August; Cutoff of Pig Iron from Ukraine Worries U.S. Steelmakers,”, Aug. 1, 2014).

At present Ukrainian pig-iron producer Evraz DMZ “can’t get the raw materials they need” to produce pig, one executive said. DMZ restarted its blast furnace No. 1 on 11 October, Steel Business Briefing reported (Oct. 15, 2014).

“Some small Ukrainian [pig] production is back on-line, but most of it is still down,” said one U.S. executive.

Pig-iron production decreased by 44 percent, quarter-to-quarter, in the third quarter of 2014 at Metinvest, the other major Ukrainian pig producer, the company said in a press release yesterday (Oct. 30, 2014). “The drops in output in the third quarter, in particular since the end of July, was due to raw-material supply constraints at Azovstal and Ilyich Steel brought about by damage to railway stations during the conflict in eastern Ukraine and the shutdown of production at Yenakiieve Steel as of 13 August 2014,” the company stated.


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