US scrap demand has been improving over the last couple months, but it may have plateaued in July; meanwhile, export scrap prices are still trending slightly up. Looking ahead, it seems that US domestic scrap prices may trend sideways in August.
After the significant domestic scrap price increase in July, particularly for prime grade scrap, prices have remained mostly stable throughout the month. Currently, on the East Coast, US domestic busheling prices are in the range of $290 to $300 /lt ($285 to $295 /mt); shredded scrap prices are between $250 to $260 /lt ($246 to $256 /mt); and HMS I prices are at a level of $220 to $230 /lt ($217 to $226 /mt).
Scrap supply remains low in the market, as there is a very limited amount of scrap being generated from US manufacturing factories. With the scarce scrap supply, it is even heard that one major domestic mill is purchasing scrap tonnage from the foreign countries such as England and Canada in order to meet their scrap needs.
As US auto plants begin to order steel again, flat rolled mills have been receiving a little bit more orders lately and are therefore purchasing scrap again in order to maintain, and in some cases, slightly increase, their production. However, overall steel demand in the US is still slow. Domestic mills are still only operating at a little over half-capacity, so their scrap needs still aren't that great. Market insiders said that domestic mills are averse to the idea of scrap prices rising in August because they aren't sure customers will accept any more price increases and fear they may not be able to recoup all of their increased raw material costs.
On the export side, last week SteelOrbis was informed that a Turkish mill bought several cargoes from the East Coast for HMS I/II 80:20 at $293 /mt CFR and shredded at $298 /mt CFR. These bookings reflect increases of approximately $13 /mt and $8 /mt, respectively, from a week ago.
With the recent modest increases in export scrap prices and the very limited prime grade scrap supply in the US, market sources expect that US domestic scrap prices may go sideways to slightly up in August. Specifically, cut grade scrap prices are likely to trend sideways, while prime grade scrap prices may go up slightly.
The latest USITC data shows that the total amount of ferrous scrap exports from the US in May 2009 was 1,717,000 mt, representing an increase of 306,000 mt when compared to the figure of 1,411,000 mt in April.
The main recipients of shredded scrap from the US in May 2009 were: Turkey, at 229,000 mt; China, at 212,000 mt; India, at 104,000 mt; South Korea, at 102,000 mt; and Taiwan, at 84,000 mt. Countries that imported smaller amounts of shredded scrap from the US during the month include Vietnam and Egypt.
For HMS I grade scrap, the top recipients of US exports in May 2009 were: Turkey, at 181,000 mt; South Korea, at 148,000 mt; Taiwan, at 95,000 mt; and China, at 93,000 mt. India, Vietnam, and Mexico also imported some tonnage of HMS I grade scrap from the US during the period.