US scrap prices for August are now expected to settle sideways to July across all grades, market insiders told SteelOrbis this week. This market view differs from late last week and earlier in July, when the consensus was for sideways to $20/gt (22/mt) higher than July scrap, mostly on reports of reduced collections at Midwest and East Coast scrap yards and expectations for continued strong exports from the US East Coast.
Scrap insiders said bad economic data concerning interest rates, recent employment statistics and stock market declines had combined to overshadow recent calls for higher August scrap pricing. As real demand for finished steel remains muted, they said, the focus for suppliers was shifting from reports of low inventories and solid export demand to maintaining cash flows as mills emerged to purchase their August scrap.
“People are having cash flow issues right now,” a Midwest scrap market insider said. “Suppliers are in a cash bind and have had to work together with the mills to get through it. When there’s not a lot of supply and not a lot of demand, it’s hard to get anything done.”
As reported earlier by SteelOrbis, East Coast scrap dealers estimated local yard supplies of ferrous scrap were down between 20-30-percent in recent weeks on a combination of hot weather and low prices being paid to peddlers. Midwest scrap dealers estimated inflows from tier 1 and tier 2 manufactures were off as much as 50 percent as high interest rates and burgeoning inflation reduced plant operating capacity and subsequent prime grade scrap generation as demand for appliances and automobiles stumbled.
The revised outlook for sideways scrap pricing flies in the face of recent price increases from steelmaker Nucor. On July 29, the steelmaker increased its Consumer Spot Price (CSP) for hot-rolled coils by $25/nt ($28/mt) to $675/nt ($744/mt), the first price increase since May 20. A second price increase was announced on August 5. At the same time, Cleveland Cliffs announced a price decrease for its September hot-rolled order book base price, lowering its offer from $36.00/cwt ($720/nt) for August to $35.00/cwt. ($700/nt or $772/mt).
Some market insiders claim the recent Nucor price increases may be another attempt by the steelmaker to put a floor under flagging steel prices like it did during the last price increase in May. Market insiders told SteelOrbis recently that price increases were likely because as Nucor’s CSP approached $32.50-$33.00/cwt. ($650-660/nt or $717-728/mt) during the week of July 15, that price was approaching the mills’ variable cost of doing business, so selling below that price could result in business losses.
Based on July US scrap settled prices, a sideways settle for August would put Midwest prime grade busheling scrap at $355-375/gt ($361-381/mt) delivered to mill, while HMS#1, which has a more limited application locally, would be at $320/gt ($325/mt) delivered, scrap market insiders said. P&S scrap and shredded grades would be at $345-355/gt ($351-361/mt), and $370-380/gt, ($376-386/mt) delivered to mill respectively, scrap market insiders told SteelOrbis.
In the US East Coast scrap markets, sideways pricing would put busheling scrap at $350-385/gt ($356-391/mt) delivered to mill, while shredded scrap would be at $370/gt ($376/mt) delivered to mill. P&S grades would be at $320-340/gt ($325-345/mt) delivered to mill, while HMS#I would be at $290-315/gt ($295-320/mt), scrap insiders said.