In our last report on January 24, scrap market players throughout the US said they believed they would be able to prevent February scrap prices from sliding. The rationale behind this prediction was linked to weather-related collection and inflow problems that were plaguing large swaths of the Midwest, Northeast, and parts of the Southeast.
This week, however, sentiment has taken a slight turn [due to falling US finished steel prices], with many suspecting that prices for certain grades, in some regions, could fall slightly once the dust settles.
“I think we’re looking at soft sideways,” one source added, noting that prime grade scrap prices will be the most likely to soften.
A second source agreed that mills are likely to, at the very least, attempt to push prices down due to downtrending HRC prices. For example, although US sheet mills attempted to push HRC spot market prices up to $57.50 cwt. ($1,268/mt or $1,150/nt), FOB mill, during the first week of January, as of today, a growing number of flat market sources say they’re hearing that a growing number of deals are taking place at $50 cwt. ($1,100/mt or $1,000nt) or below.
“The question for dealers is whether we take the down numbers now or whether we play the long-game expecting scrap to get tight this spring/ summer,” he added, eluding to the surge in US steelmaking capacity that will happen during 2024-2025 due to new EAF capacity that’s set to come online. “I suspect [for February] we will see some deals get done at down numbers.”
As of today, the revised expectation for February scrap prices is soft sideways in the Southeast, with primes having the most potential for down pricing. Prices in the Northeast / Midwest are the most likely to see slightly up pricing for cut grades, due to lessened scrap inflows and slower/lagging scrap deliveries to mills, although nearly all sources polled believe that sideways to slightly down is the most likely scenario.
“A lot of what happens this month will have to do with the weather and mill inventories,” a final source said. “It may be a game of chicken this month.”
The February scrap trade is expected to kick off during the early part of next week.