Although high-quality industrial scrap prices recently took another huge leap, shredded and HMS grades have seen only a small gain so far this month in the US scrap market.
After US factory bundles jumped $135 /lt, busheling scrap followed with another eye-popping increase of over $100 /lt this month. However, the gains for shredded and HMS grades were only a disappointing $10 to $30 /lt. This type of separate price dynamics in different grades of scrap has not been observed in the US market for a long time.
The main reason why busheling is strong is the robust demand from the flat rolled mills and the lack of availability of industrial scrap. Flat rolled mills have been raising their prices in the last three months, and they have disciplined their customers to accept most of the increases that they have announced. Since they are getting what they want on the sales side, mills have been giving in on the buying side and paying higher prices for scrap.
Compared to the strength of the flats price increases, long product gains have been much more moderate, so cut scrap buying activity has not been too aggressive. This is partially why HMS and shredded scrap prices have not gone up as much as flat rolled this month.
Also, while the high scrap prices have been attracting more collection of cut grades, the industrial scrap supply has been reduced by less production of automotive and other household appliances.
As a result of these factors, the US has seen an unusual gap developing between the two scrap grades.
To sum up the recent developments in US scrap prices, US factory bundle prices rose by around $150 /long ton (lt) in April, and they climbed by another $135 /lt in the beginning of May, pushing factory bundle prices to an average level of $710 /lt currently.
Following the factory bundle price increase in April, busheling scrap prices rose by approximately $180 /lt, while shredded scrap and HMS I went up by approximately $150 /lt.
And as mentioned above, so far in May, scrap prices have registered a $100 /lt increase for busheling and a $10 to $30 /lt increase for HMS I and shredded.
As of last week, Midwest busheling scrap prices were in the range of $690 to $700 /lt, and shredded scrap was sold for $580 to $590 /lt, while HMS I ranged from $520 to $530 /lt.
Looking ahead to this summer, more increases are expected in June, with especially big ones for cut grades. In July, a time of year when manufacturing activity usually slows down, the generation of industrial scrap declines -- another indication that further price increases are likely this summer.
Another key piece of the US scrap puzzle has been exports. Export prices have increased strongly since April as well. For example, SteelOrbis has been informed that a Turkish mill has recently concluded a scrap booking ex-US. The cargo is composed of HMS I/II 80:20 scrap booked at $725/mt CIF Nemrut, and P&S scrap booked at $735/mt CIF Nemrut. This price level is up by approximately $120 /mt from the prices in the beginning of April.
USITC data show that the top recipients of shredded scrap from the US in February were: Turkey, at 102,000 mt; Thailand, at 96,000 mt; Taiwan, at 87,000 mt; South Korea, at 67,000 mt; and Greece, at 47,000 mt. India, Egypt, China, Malaysia and Mexico also imported some tonnage of shredded scrap from the US during the period.
For HMS I grade scrap, the top recipients from the US in February were: Turkey, at 153,000 mt; Taiwan, at 42,000 mt; South Korea, at 37,000 mt; and Egypt, at 34,000 mt. Some other countries which imported HMS 1 grade scrap from the US in February include Greece, Thailand and Malaysia.
Foreign countries realize that they can get more tonnage for their money due to the weak US dollar, and their increasing purchasing power is boosting the US scrap export market. The total amount of ferrous scrap exports from the US in February was 1,053,000 mt, which is an increase of 108,000 mt when compared to the figure of 945,000 mt in January. Although US scrap prices have jumped up significantly in April and May, prices are still below the international level, and are therefore still attracting interest from foreign countries. As the above data show, Turkey in particular is a major recipient of US scrap, providing a significant boost to the US scrap export market.
On the other hand, though the weak US dollar is boosting the scrap export market, it also prevents imported scrap and other raw materials from coming into the country. For example, statistics show that the total amount of pig iron that the US imported in January was 194,292 mt, all of which came from Brazil, at 192 871 mt, and Canada, at 1,421 mt.