In our last report a week ago, sources throughout the US believed that next month’s settled prices were likely to trend at sideways to slightly down. Although scrap inflows in some regions have diminished due to frigid temperatures and snowstorms (with some dealers indicating their inflows are down by as much as 15-30% from January), some suspected that mills might attempt to put downward pressure on scrap prices due to softness in the flat rolled steel market.
This week, however, most sources polled said they believe that dealers will be able to prevent February prices from sliding.
“February will be sideways if [mills] want to keep running. [Prices in] March-May [might also] still be ok as we hit the spring construction season and the mills ramp up [their] output,” a Midwest source said. “Right now, I would tell you I am [predicting] strong sideways for Feb and I think that pricing will carry over to March, regardless of what the mills want.”
A source in the Northeast, which was also recently hit by a major snowstorm, said the scrap inflows in his part of the country are bad, which is also supportive of sideways or strong-sideways pricing.
Chicago-area sellers agreed that collection and inflows have been a challenge, while a second Midwest-based source said he expects that mills will still be owed quite a bit of scrap come January 31. He also expects that mills that are still owed material come January 31 may cancel some of their unfilled orders if they still have decent inventories, and if they believe they can get more favorable prices in February.
A source in the Southeast also believes that mill deliveries may come up short this month.
“I think the winter weather has certainly impacted flows to the point where it will be meaningful and a good amount of scrap will be owed into February,” he wrote. “I’m thinking sideways right now across the board as scrap demand should still be relatively strong.”
On the other hand, a minority of those polled still believe that mills may try to push prices down.
“Short of collection being an issue, [it] sounds like every other indicator suggest down,” another source said, while a final market player agrees that soft-sideways could be in play for primes.
“I can’t see all grades coming down, but maybe primes will see a modest downside.”
The February scrap trade is expected to commence during the week of February 5.