In our last report 10 days ago, SteelOrbis reported that attendees of the Institute of Scrap Recycling Industries’ (ISRI) Mid-America Chapter Consumers Night banquet believed that March prices were likely to soften. And while some in the Midwest were pegging the market at soft-sideways, others believed that down $20-$30/gt in other regions would be the most likely outcome.
On Thursday of last week, that sentiment continued to hold.
One day later, scrap buyers and sellers on both sides of the Atlantic Ocean were caught completely off-guard when a report that down $50/gt “across the board for all grades in all regions was all but guaranteed” began to make its way through the marketplace.
Almost immediately, SteelOrbis started reaching out to scrap market players in all regions of the US to determine what, if anything, had changed between Thursday afternoon and Friday morning.
Sources were perplexed by the prediction, adding that many still believed that down $20-$30/gt was more likely.
“[Down $50/gt appears to be] pretty steep at this juncture,” one source added, while another said that while they believe that prices are likely to soften in March, they were “not sure to what extent [they] believe the drop will be because it does not see to be doom and gloom all around.”
Also of note is that the spread between prime grade scrap prices and HRC is still wider than it was five months ago.
For example, in October of 2023, when the pricing run-up on US domestic HRC started to gain steam, busheling scrap prices in the Ohio Valley were trending at approximately $405-$415/gt ($412-$422/mt). At that point, US HRC prices were trending at approximately $35 cwt. ($772/mt), which put the conservative spread between bush and HRC at about $350/mt.
By December, US HRC prices had climbed by approximately $18 cwt. ($396/mt) from October levels, while busheling scrap, on the other hand, had only risen by about $90/gt ($91/mt). This put the spread between HRC and primes at about $658/mt.
As of late-last week, US HRC prices were trending at an average of $44 cwt. ($970/mt), against a February Ohio Valley settled busheling price of $483/mt, which put the spread between primes and HRC at roughly $487/mt.
All sources polled believe that mills will continue to exude downward pressure on domestic scrap prices, especially in light of still-falling hot rolled coil prices. And while all agree that primes will endure the most downward pressure (one source said they think that down $40/gt for primes is within the realm of possibility), down $50/gt for all grades “seems ambitious.”
“Scrap prices didn’t spike anywhere close to what we saw happen with hot rolled,” another source said. “It makes sense that mills will try to push scrap down when hot rolled is falling, but I don’t think the market is going to come down by $50/gt on all grades in all regions.”
And while the scrap market does appear to have a bit more downside than it did 10 days ago, it’s not immediately clear whether this is because the market is softening by the day (sources have said that inflows in some regions have begun to pick up, which may help mills in their effort to push prices down), or if this is a result of the market reacting to a reported “down $50/gt on all grades” report that circulated last Friday.
“I do think we’ll see downward pricing in March,” a final source said, “but I don’t see the market imploding on itself.”
The March buy cycle is expected to start toward the middle of next week.