US scrap prices for August are now seen strong sideways with some reporting prices could rise as much as $20/mt ($20/gt) across all grades on a delivered to mill basis from July levels, as inventories at local scrap yards in the US Northeast and Midwest dwindle amid reduced collections, low finished steel demand, and lower reported manufacturing and construction activity, scrap market insiders and recent government and industry reports indicated to SteelOrbis this week.
The August outlook this week differs little from the week of July 15, when the market consensus was a bit more vague, with August scrap reported at strong sideways to higher, on continued low demand for finished steel, increased reports of reduced scrap yard inventories and a lull in July manufacturing activity caused by Fourth of July plant closures, which reduced mostly prime grades of available scrap, insiders said.
As reported by SteelOrbis earlier, East Coast scrap dealers estimated local yard inventories were down between 20-30-percent in recent weeks on a combination of hot weather and low prices being paid to peddlers. One Midwest scrap dealer estimated his inflows from Tier 1 and Tier 2 manufacturers he normally deals with were off as much as 50 percent.
“There’s very little clarity in the US scrap markets right now, but we expect to hear more market chatter by the middle of next week,” said one Midwest scrap market insider, reflecting on reports of higher August pricing. “Right now, we’re hearing that scrap is in short supply, and the mills know it.”
Reports continue to circulate in steel trading circles of “across the board” price increases for next month, he said, adding that more concrete discussions about August scrap pricing is expected early to mid-next week as the August buy cycle draws closer.
“There’s reports of plus $20 (per metric ton) across the board for scrap for August, and it very well could be,” he added.
Another scrap contact said, “I’ve been on vacation and came back to a (mess),” he said. “I can see strong sideways for next month, with prime grades (busheling and #1 bundles) having the best chance for up money.”
SteelOrbis steel contacts continue to report that low finished steel prices such as hot-and-cold rolled coils, used for appliances and automobiles, as well as rebar used in construction, could have bottomed because of the growing outlook for higher scrap values in the near term.
“I think prices have definitely bottomed,” said one Midwest rebar market contact, reporting on a slight bump in domestic rebar valuations in the Chicago area following several months of consistent declines. “We’re hearing more and more reports that August scrap prices are rising.”
Based on July US scrap settled prices, a sideways to $20/mt increase for August would put Midwest prime grade busheling scrap at flat to $20/gt above the July settle price of $355-375/gt ($361-381/mt) delivered to mill, while HMS#1, which has a more limited application locally, would be at to $20/gt above $320/gt ($325/mt) delivered, scrap market insiders said. P&S scrap and shredded grades would be at to $20/gt above $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, busheling scrap vicinity Pittsburgh would be at to $20/gt above $350-385/gt ($356-391/mt) delivered to mill, while shredded scrap would be at to $20/gt above the July settle of $370/gt ($376/mt) delivered to mill. P&S grades would be at to $20/gt higher than the $320-340/gt ($325-345/mt) reported delivered to mill range, while HMS#I would be at to $20/gt above $290-315/gt ($295-320/mt) delivered to mill.
On the finished steel side, on July 22, US steel maker Nucor announced its weekly Consumer Spot Price -the price it charges for hot-rolled coils at all of its producing mills- was steady to the previous week at $650/st ($717/mt). Since early April, Nucor’s HRC prices have declined nearly 21.7 percent as demand for finished steel goods remained muted amid high interest rates, soaring year-over-year inflation statistics, high energy prices, and a looming US presidential election in November. Spot HRC is reported flat this week at $32.50-$33/cwt. ($717-728/mt or $650-660/nt), market insiders told SteelOrbis.
Recent government and industry reports seem to support recent market insider claims of steady prices and some limited price declines across finished steel grades.
According to the US Census Bureau, construction spending during May 2024 was estimated at a seasonally adjusted annual rate of $2,139.8 billion, 0.1 percent (±1.0 percent) below the revised April estimate of $2,142.1 billion. The May figure is 6.4 percent (±1.6 percent) above the May 2023 estimate of $2,011.8 billion. During the first five months of this year, construction spending amounted to $836.3 billion, 8.8 percent (±1.2 percent) above the $768.6 billion for the same period in 2023.
On the manufacturing side, the S&P Global Flash US Manufacturing PMI index declined unexpectedly to 49.5 in July 2024, the lowest reading so far this year, compared to 51.6 in June and forecasts of 51.7. The reading signaled a deterioration in business conditions within the US goods-producing sector amid declines in new orders, production and inventories. A reduced rate of employment growth also acted as a drag, the report said. Meanwhile, suppliers’ delivery times lengthened marginally, though the lengthening was only very marginal.
On the price front, the S&P report said prices charged for goods leaving the factory gate rose the least in a year, but input prices rose at a faster pace due in part costs for raw materials, energy and logistics. Finally, business sentiment ticked up from June’s 19-month low, often linked to the expansion of capacity and the anticipation of demand improving over the coming year, especially after the (November presidential) election, the report said.