US November scrap pricing is expected to trade sideways to $5-10/gt ($5-10/mt) lower this week, as many larger US mills are expected to draw down onsite inventories of scrap, rather than buying new supply during the November buy cycle, market insiders told SteelOrbis this week.
The sideways to lower call is in stark contrast to recent sideways to higher calls recently heard by SteelOrbis, before mills issued a new set of cancellation orders on October 30.
“HMS was the first grade that was canceled exclusively by the mills on October 30,” said one Midwest scrap broker. “On this grade, we’re hearing that mill supply is more than adequate, therefore, we could see potentially $5-10/gt lower there, but it is not guaranteed at this point.”
“I’m expecting the markets to trade sideways for November, but I wouldn’t be shocked if it traded less for HMS, because there’s weakness in that grade,” he added. “The mills have said that they’re basically going to be doing an inventory reset for November.”
Other market contacts expect a larger decline across the board for November, though they cautioned that the activity thus far remains muted as many market insiders were sidelined waiting for the outcome of the November 5 US presidential election to address their November scrap requirements.
“I believe it will trade sideways in Chicago and Detroit for the new month,” said another Midwest scrap insider. “We could potentially see markets down a bit in areas that finished higher during the October buy cycle. There’s really not much discussion yet about how much prices could be off for November, but, I would say potentially $10-$20/gt less maybe, if it happens.”
“Recent global steel market pricing is not sticking,” another Midwest scrap insider told SteelOrbis the week of October 28. “As a result, the next thing the US mills are going to do is take it out of the price of November scrap.”
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 to pricing this go-round.
“Offers from dealers on shredded scrap are seen really tight this month,” another Midwest scrap dealer told SteelOrbis. “Flows are just not coming in for some areas like the Mid-South and Upper North.”
“It’s been super quiet thus far,” said one Midwest mill contact on November 5. “However, it doesn’t seem that there’s a whole lot of people that are interested in buying very much November scrap. We’re thinking that once the election is called, activity will increase once people get back to their desks and resume trading.”
Based on a sideways to lower November scrap call, Ohio Valley busheling scrap on a delivered to customer basis for November is forecast to settle at or below the October settle of settle at $375-395/gt ($381-401/mt), while shredded grades are seen at or below the $370-380/gt, or $376-386/mt. HMS#1 is likely to settle at or below the October settle 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.
The November buy cycle is expected to conclude by Tuesday, November 11, with regional settle prices available shortly thereafter.