US ferrous scrap market expected to remain stout on strong mill demand

The US Midwest ferrous scrap market extended its upward momentum, rising in February for the first time since 2010 on strong export, good order books and low scrap inventories

With the next trade less than three weeks away, sources expect the momentum to carry into March.

“No mills were able to get long on scrap, their orders books are strong and inventories of scrap are down, so I see March no worse than February. It feels like a strong sideways,” said a seller into the Detroit and Indiana mills.

A Midwest broker agreed. “The market has support and there is a repeat performance ahead for March. There is pretty good strength and demand is pretty good. March is going to be better. For the time being, no volatility moves are on the horizon either,” the Midwest broker said, adding he thinks the moves will be up and down $20 per gross ton in the foreseeable future.

A third Midwest source said while shred may be sideways, he sees prime moving higher in March because mills are enjoying rapidly rising selling prices and won’t risk losing the prime tons.

It is unusual that February saw higher prices. The last time No1 busheling, delivered Midwest mill, increased in a February was in 2010, when it rose to $405.72 per ton from $391.14 per ton in January 2010, according to Fastmarkets records.

The Chicago and Indiana markets paid up $30 per ton on No1 Busheling and shredded scrap on trend, while Detroit entered up on prime $20 per ton.

With prices from the trade settled in publications, sellers who held out are seeking to outperform the monthly settlement prices.

Sellers do have leverage.

The US shipped an estimated 18 cargoes off the East Coast to Turkey in January, which contributed to the tightness in scrap availability. About 200,000 tonnes of material from these 18 cargoes could have included shredded scrap. The breakouts of each cargo — which include heavy melt, shredded and bonus grade material — are not always reported.

Shredded scrap has been tight, but sources say the latest increases on feedstock being paid by the shredders should begin to loosen availability and motivate auto wreckers and dealers to sell more tonnage.

A snap of snowy and icy subzero weather worked to disrupt scrap flows for about a week in early February.

Export is the wild card after March. If Turkey remains out of the market, US mills have less competition from overseas mills so supply will increase. However, one source suggested that India may become more active and absorb material that Turkey may not need.

At the same time, US mills could seek to limit domestic prices by importing scrap from Europe, if Turkey remains out of the picture in the aftermath of the earthquakes on February 6.

Even if export falls apart, dynamics are still in place for a strong March because flows are still substantially off and mills barely covered, according to numerous sources.

“Scrap pipelines got skinny, and I see March more up than down,” a mill buyer said.

Hot-rolled coil prices continued to increase — up nearly $100 per short ton in the last 30 days — and mills are sold out on spot orders through March and May depending on the mill, according to scrap sources.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US Midwest was calculated at $41.80 per hundredweight ($836 per short ton) on Thursday February 9, up 14.30% from $36.57 per cwt ($731.40 per ton) on January 9.

Fastmarkets’ steel scrap No1 busheling index, delivered Midwest mill was calculated at $475.25 per gross ton on Friday February 10, up 5.83% from $449.06 per ton in January.

Fastmarkets calculated the steel scrap shredded, index, delivered Midwest mill at $456.09 per ton on Friday, up 6.42% from $428.58 per ton in January, and the steel scrap No1 heavy melt, index, delivered Midwest mill at $362.60 per ton, up 3.82% from $349.27 per ton in January.

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