Priced out of the market

Departments - Commodities Ferrous

Export demand for ferrous scrap has been down, pushing prices lower in parts of the U.S.

February 23, 2021

Overseas buyers of American ferrous scrap maintained a minimal presence in late January and early February, pushing prices on the U.S. East and West coasts down during that time frame.

Surveyed pricing calculated by Fastmarkets AMM shows the downward price pressure eventually moved inland for two of the three major ferrous scrap grades—shredded scrap and No. 1 heavy melting steel (HMS)—while prompt grades held onto the value they had gained in the previous three months.

“Flow has been good, but we’ve been hit pretty hard by inclement weather, and that will slow things down for a bit.” – a scrap processor in the western U.S.

Trade press reports throughout late January and into February pointed to a lack of bulk cargoes heading to Turkey off the East Coast. Demand on the Pacific Coast also was reported to be sparse as mill buyers around the world pulled back from buying American scrap that had gained some $150 to $200 per ton in value over the previous 60 days.

As of mid-February, ferrous trader and consultant Nathan Fruchter of New York-based Idoru Trading says where the export market heads next remains uncertain. “I see demand in other regions, but it’s hard to tell with Asia being slow this week because of the Lunar New Year.”

U.S. steel output paints an encouraging picture. The Washington-based American Iron and Steel Institute (AISI) reports that 1.74 million tons of steel were produced in the U.S. during the week ending Feb. 13, with mills operating at a capability utilization (capacity) rate of 76.9 percent.

That weekly figure is 5.5 percent smaller by volume compared with the same week in 2020, showing output is climbing steadily closer to pre-COVID-19 levels in the U.S. steel sector.

U.S. steel output for the week ending Feb. 13 grew by 2.2 percent compared with total production during the previous week, ideally pointing to stable or growing finished steel demand.

On the supply side, recyclers say higher scale prices yielded the expected result of increased volumes. “It has gotten stronger and definitely is picking up to what we expect and want,” a processor in the West says of flows into his company’s yards.

“Things have been busy in the yard, especially with the current market,” says a recycler in the Northeast. “I had locked in some decent pricing in January and was rushing to fulfill that order.”

The increase in obsolete scrap flows abetted by higher scale prices created a disparity in movement for monthly index prices Fastmarkets AMM released Feb. 10. While the Midwest Index price for shredded scrap fell by about $70 per ton, and No. 1 HMS scrap dropped by about $55 per ton, prompt grades held onto their value.

The role of export markets in the price disparity between obsolete and prompt grades can be seen in the Fastmarkets AMM East and West coast index prices for early February. Those export markets, which largely buy HMS scrap, fell by about $47 per ton on the Pacific Coast and by $50 per ton on the East Coast.

Scrap processors will be keeping an eye on whether overseas buyers return to the market now that prices have fallen back to a level they find more palatable. In the meantime, overseas buyers might not find huge inventories of scrap to purchase even though they stayed away from the market for 30 days.

The West Coast processor who describes his scrap flows as stronger adds, “Flow has been good, but we’ve been hit pretty hard by inclement weather, and that will slow things down for a bit. There is still room to improve, as flows are still down from our averages before the pandemic.

“Demand seems to be strong for February,” the processor continues. “Buyers are wanting material across all commodities,” he adds.

Parts of the U.S. have experienced heavy snowfalls in February. The northeastern processor says severe weather has not affected his operations but adds that late winter tends to be a slow period regardless. “We have not seen as much coming in, [and] this is often a slower time for us anyhow,” he says. “We continue to receive scrap from our bigger customers, but local smaller foot traffic is much slower.”

In the third week of February, reports from Fastmarkets AMM and Davis Index indicate Turkish mill buyers are beginning to make more frequent bids and raise their prices for imported scrap.

As of Feb. 16, Davis Index reports, “Turkish mills are expected to continue ferrous scrap purchases this week as they require cargoes for March and April shipment.” Prices for scrap shipped from the United States to Turkey are rising as a result, according to Davis Index.

On the domestic steelmaking front, the AISI in late January expressed support for early Biden administration decisions on “Buy America” requirements and increased infrastructure spending.