US ferrous scrap pricing for the month of October continues to be seen sideways to higher, unchanged from seven days ago, as supply remains tight at local scrap collection points, and fewer US steel making facilities are expected to be offline for maintenance next month, resulting in improved scrap buying from mills, market insiders told SteelOrbis this week.
Insiders said as demand for finished steel products such as appliances and automobiles continues to lag due to ongoing US economic conditions, contacts suggest tier I and tier II manufacturing capacity has been reduced by between 20-30 percent, thus, reducing the amount of available prime grade scrap normally available from those sources. Sources added this week’s Federal Reserve’s half-point interest rate cut, while positive, will likely take time to trickle down into improved demand levels for finished and construction-related structural steel.
“I would expect the mills to be more active buyers in October than they were in September, simply because they’ve got more furnaces online,” said a Midwest scrap broker. “As a result of this, I would suggest the October scrap market would be sideways to higher.”
The market insider added that with flat rolled steel prices beginning to creep up, it remains unclear what this meant for October scrap. “If demand begins to turn around, we could see prices skyrocket because the scrap supply just isn’t there..” he said. “But, at this point, I don’t expect too much to change for next month as demand remains low.”
During the week of Sept. 9, market insiders told SteelOrbis the number of planned outages at steel mills during September was expected to decline for the months of October and November, resulting in a market bottom having been reached. About 17 mills were in outages for September, with that number expected to decline to about 14-15 mills in October, “which should improve mills’ demand for scrap,” they said.
Another scrap trader was less optimistic about the outlook for higher priced October scrap.
“It’s basically the same thing we’ve been hearing for the past 1-2 weeks,” said a Midwest scrap market insider. “The October market is called strong sideways, whatever that means, as there’s very little downside left for scrap. Steel prices are beginning to pick up a bit, but demand and supply are still on the weak side, so I don’t expect that much will change for October.”
“The recent interest rate cut from the Fed is really not going to move the needle much, also with regard to the potential for a port strike in October, I think that’s really going to have more of an affect on the East Coast than the Midwest,” he said. “It’s mostly going to be a regional issue. On the pricing front, everyone is continuing to cry the blues, so not much has changed.”
Industry reports estimate that about 43 percent of all US imports, including containerized scrap, flow through the US East Coast and Gulf Coast ports currently subject to interruption should a dockworkers strike occur after the Sept. 30 current six-year contract expiration. Contract talks are currently stalled, the International Longshoreman's’ Association (ILA) said, and the Biden administration still has no plans to institute Taft-Harley to break up a strike should one occur on Oct. 1.
Based on September scrap settles, Midwest prime busheling scrap for October delivery is assessed sideways to higher than the September settle of $355-$375/gt ($361-381/mt) delivered to mill. October shredded scrap, which declined $20/gt ($22/mt) during the September buy cycle, is seen sideways to higher than the $350-$360/gt ($356-366/mt) September settle, while October HMS#1 is seen sideways to higher than the September settle of $320/gt ($325/mt). At current, P&S scrap is discussed sideways to higher than the September settle of $345-355/gt ($351-361/mt) delivered to mill, insiders said.
On the US East Coast, September busheling scrap is expected to settle sideways to higher than the $350-385/gt ($356-391/mt) delivered to mill September settle, while shredded is talked sideways to higher than the $370/gt ($376/mt) September settle. HMS#1 and P&S scrap are also forecast to settle sideways to up from the September settles of $290-315/gt ($295-320/mt), and $320-340/gt ($325-345/mt) delivered to mill, respectively, market insiders told SteelOrbis.