US domestic scrap pricing for the month of November is now seen trending sideways to down, as many mills are reported to have issued cancellation orders on October 30, for as of yet undelivered October scrap, indicating potentially limited demand for November scrap during next month’s buy-cycle, market insiders have told SteelOrbis this week.
The November scrap outlook is in stark contrast to seven days ago, when the November market was seen strong sideways to as much as $30/gt higher, mostly on an expectation for increased mill buying as many plants returned from scheduled maintenance outages.
“Recent global steel market pricing is not sticking,” a Midwest scrap insider told SteelOrbis, adding, “As a result, the next thing the US mills are going to do is take it out of the price of November scrap.”
SteelOrbis reports indicate Turkish deep sea scrap trades concluded on CFR basis at $363/mt, down from recent highs at $388/mt CF after Chinese stimulus measures. Insiders said the market is currently likely “at the bottom.”
Insiders said next week’s US presidential election is also increasing uncertainty in the markets and so far it remains unclear how either political party’s policies will affect the US steel markets.
And while October scrap was priced largely based on the geographic region, it appears scrap grades and their perceived supply levels will be more important for pricing this time.
“Offers from dealers on shredded scrap are seen really tight this month,” the Midwest scrap dealer said. “Flows are just not coming in for some areas like the Mid-South and Upper North,” he commented.
“The cancellation letters are a concern, but nobody’s really very sure at this point where the market’s going to head,” he noted, adding, “This whole year’s been an uphill battle.”
“Last week, the markets for November were calling for scrap to be up,” another insider remarked to SteelOrbis. “Now, it’s looking like there’s some softness out there, because demand is just not good. So far, we’ve seen canceled orders from Nucor and Steel Dynamics, while we’re expecting the same from North Star Blue Scope very soon,” he added.
Last week, larger scrap dealers were heard to be calling the markets sideways for November amid reports many were either stockpiling large amounts of inventory, preparing for some upside in the near term, or had large inventories on the ground because they were unable to move the product fast enough. It is now clear to SteelOrbis that the latter was the case.
“I guess this just goes to show you how fast the markets can change,” said one SteelOrbis scrap market insider source. “While the market was called strong sideways to higher last week, as of last night cancellation orders have been sent out and many mills are full of scrap, with the best case scenario looking sideways to potentially lower right now.”
Another key downside consideration mentioned last week was that since November and December are holiday months in the US, “Demand for scrap is a bit more limited,” as the insider told SteelOrbis. Spot market activity is expected to be limited on Thursday and Friday, November 28-29, while Christmas will limit spot trading for a more considerable period. Trading is expected to remain light from Monday, December 23, through Tuesday, January 2.
Based on a sideways to lower November scrap call, Ohio Valley busheling scrap on a delivered to customer basis for November is forecast to be at or below the October levels which settled at $375-395/gt ($381-401/mt), while shredded grades are seen at $370-380/gt or $376-386/mt. HMS 1 is likely to settle at or below the October settled level of $340/gt or $345/mt, while P&S is expected to settle at $365-375/gt or $371-381/mt at the close of the November buy-cycle.