FERROUS WEBINAR: Steady hopes; downside lingers

Market participants in the US ferrous supply chain attending a Fastmarkets webinar on June 30 expected prices to be largely stable in the coming months, but benchmark indicators continue to track downward as an uneven reopening of the United States economy clouds the outlook.

About 62% of respondents to a poll held during the webinar – titled “Sunny days ahead?” – expected hot-rolled coil prices to be largely stable over the summer, while 52% expected scrap prices to do the same.

Fastmarkets steel hot-rolled coil index, fob mill US, however, has recently fallen to $23.36 per hundredweight ($467.20 per ton) on Tuesday July 7, down 2.9% from $24.06 per cwt on Monday July 6 and down 0.7% from $23.52 per cwt a week earlier on June 30. 

Prices are now at their lowest point since dropping to $21.89 per cwt on April 30 – a four-year low.

Fastmarkets steel scrap No1 busheling, consumer buying price, delivered mill Chicago settled at $320 per gross ton in June, up $10 per ton from May when it rose by $40 per ton.

The uptrend and stable expectations are running counter to early signs in the July scrap trade, with leading market Detroit setting the pace with significant drops across prime and obsolete grades. No1 busheling is heard to be selling as much as $40-per-ton lower in July, while shredded scrap and cut grades could be down $20 per ton.

Conversely, webinar participants said prime scrap prices could fare better overall than obsolete grades for the rest of the year, with 72% of respondents saying grades like No1 busheling would outperform. The gap between prime and heavy melting scrap, for example, has been growing as automotive shutdowns crimped prime supply, although this could moderate in July with the reopening of the US economy.

In Chicago, the gap between the two grades is $105 per ton, up from a $45-per-ton spread at the start of the year. 

Volatile scrap prices, however, are not expected to impede the development of the US electric-arc furnace (EAF) market. A significant 67% of respondents expected EAF market share to grow in 2021 vs just 8% on the integrated side, likely due to the number of projects slated to come online in the next few years, like Steel Dynamics’ Sinton, Texas, mill. 

In scrap-related raw materials, a key area of interest for webinar participants was China’s growing influence on the global pig iron market. Mills there have started to snap up material from the Commonwealth of Independent States and Brazil in order to produce steel in a more energy-efficient manner. 

Prices have subsequently become more volatile, with the gap between Chicago busheling and pig iron imported to the US expanding rapidly in 2020 due to China’s buying spree. The spread, however, has recently tracked closer together because more deals were struck with US buyers at lower prices, according to Fastmarkets pricing data and reports.

The spread climbed as high as $67 per ton in March, with pig iron selling at a premium, only to fall back nearly to parity, an analysis on Fastmarkets’ dashboard shows. Fastmarkets assessed the price for pig iron import, cfr Gulf of Mexico at $320-325 per tonne on July 3, down from $350-355 per tonne a year before.

To watch the recording of this webinar, click here.