Scrap futures point to downward ferrous market drift

Scrap futures point to downward ferrous market drift

Nasdaq market bids for scrap show decreasing monthly prices throughout 2019.

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November 28, 2018
Brian Taylor

Forward monthly bid pricing on the Nasdaq Futures Exchange (NFX) is pointing to lower ferrous scrap pricing throughout 2019.

An NFX bid pricing summary circulated by New Jersey-based World Steel Exchange Marketing (WSEM) has shredded scrap settling at $349 per ton in December 2018, and then drifting downward monthly to reach $325 per ton in December 2019.

WSEM says the NFX pricing is pegged to Fastmarkets AMM U.S. Midwest surveyed shredded scrap pricing in the Great Lakes region, which is disclosed on or around the 10th of each month.

Companies placing forward bids or hedges appear bearish on scrap pricing going forward, with each succeeding month between now and February 2020 currently closing at a lower or, in two cases, static monthly price. Not one month in the next 14 features a rising price.

One scrap processor contacted by Recycling Today agrees with the sentiment, stating, “I feel good about the first quarter. I do think the overall  bull market and strong economy  could start to peter out toward the second half of the year, especially if the tariff/trade war with China isn’t sorted out.”

The trade dispute is one of several factors weighing on the world’s two largest economies in the United States and China. Other analysts are concerned about ongoing steel production overcapacity issues in China that could result in lower global prices. Meanwhile the United States economy, which has been steadily growing for nearly 10 years, could include a lackluster automotive sector in 2019, which would suppress demand for steel.

Economists in the U.S. are more optimistic about the construction sector, and the recycler quoted earlier, who has operations in the Mid-Atlantic region, says steel and scrap prices could be helped in 2019 “if any infrastructure bills [or] money starts flowing.” He adds, “Then the [steel and ferrous scrap] demand could remain for a much longer time.”