Supply concerns, strong demand buoying US ferrous scrap market

“People who had scrap inventory cashed out in February and don’t have much now. People thought February was the peak,” an Ohio seller said.

A Detroit seller shared a similar story.

“We are still shipping February and hear other people are short big time for February [shipments]. We were unsure where March was going, and it went up so good from December to February, we cashed in,” that seller said, adding that he has heard that shred will be up $25 per gross ton and prime up $50 per gross ton in March.

A large national seller said he expects the shred and prime scrap markets to go up by $20-30 per ton and possibly $40-50 per ton or even more.

“This is going to be an auction, with every mill competing against each other this month,” the national seller said.

Numerous sources said that mills are just as hungry for shredded scrap as for prime grades.

Fastmarkets’ assessment of the No1 busheling, consumer buying price, delivered mill Detroit rose to $440 per gross ton in February, up from $330 per ton in November; meanwhile, shredded scrap was assessed at $420 per gross ton this month, up from $350 per ton in November.

Also fueling the pre-trade price frenzy are the frequent increase announcements for on hot-rolled coil. Hot band prices have risen by more than $300 per short ton since November, and mills are seeking even higher ground, most recently targeting a base price of $1,000 per short ton.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US Midwest was calculated at $48.42 per hundredweight ($968.40 per short ton) on Thursday February 23, up from $32 cwt ($640 per short ton) on November 10.

Market chatter is already circulating that more price increases are imminent.

“This is a double-whammy of supply and demand. Right now the [scrap] supply is not there and demand [for finished steel] is there,” the national seller said of what is motivating the price increases on finished flat-rolled steel.

Mills have been raising their steel prices quickly to get ahead of the looming scrap increases, according to numerous sources.

After the February trade, there was a sense that March would be sideways after three months of rising prices. At the same time, there were concerns about the market impact of two earthquakes in Turkey — the United States’ largest importing region — early this month.

It has since become apparent, however, that Turkey needs a lot of scrap to support its rebuilding efforts. As of February 22, the running tally for global cargoes booked by the region was estimated at 22 for this month — two more than initially expected, and three of which are confirmed from the US.

The latest sale booked off the US East Coast contained heavy melting scrap 1&2 (85:15) at $455 per tonne and shredded scrap at $470 per tonne. The price for the HMS portion of the cargo is broadly equivalent to $452 per tonne CFR for an 80:20 mix of the grade, meaning the HMS and shredded scrap prices are up approximately $30 per tonne and $26 per tonne respectively compared with cargoes booked at the start of February.

One broker indicated that they are already working to line up commitments with mills ahead of the March trade, adding that they did not believe the market’s opening would drag out because mills need material.