US domestic ferrous scrap trade for October could move sideways on secondary grades against September settled prices once it formally begins in Chicago and Detroit on Tuesday or Wednesday.
The trade direction is considered soft against stronger expectations in mid-September, following a $30-55/gt price increase last month against August settled prices. Price expectations have waned due to a slowdown in exports, a pickup in material flows, and a sluggish rise in finished steel prices.
Market participants throughout the Midwest and Southeast were quiet on Monday, expressing hopes in seeing a sideways market for secondary grades, such as shredded, heavy melt, and P&S 5ft, this week. Primes are expected to tick up by $10-20/gt, especially busheling because of its demand, though its supply remains limited as auto recovers.
Mills in the Pacific Northwest came out with sideways scrap offers against September settled prices across all grades on Oct 5. The offers did not meet resistance from sellers in an environment that also saw some regional docks reduce prices by $5/mt. The sideways offers against weak export demand give support to the expectation that major steel regions in the Midwest, Southeast, and South will trade sideways to slightly up from September settled prices.
There have been no reports of mills canceling September scrap orders and many sellers still have unfulfilled tonnage on prior orders. The delays on deliveries are attributed to reduced service days, issues with truck fleets, and slow railcar turnarounds. Historically, railcars were turned around up to twice monthly, but lately, only one shipment per month has been possible.
Yards report that flows are recently back to near-normal levels and improved by about 30-40pc from 60 days ago. The increased supplies are expected to limit the upward potential buying prices by mills.
Some regions across the Midwest will have pockets of stronger demand and may see prices driven above the sideways trend. Mill order books continue to gradually improve and some scrap buying programs could be healthier than others. Markets overall are viewed as firm compared to the traditional weakness seen during Q4 which should continue aiding mill recovery.
Pig Iron
China has pulled back on pig iron purchases, leading to some price decline on the material. Several cargoes of the grade were sold to the US from the CIS in late September after prices peaked in Asia. The deal adds to the ample scrap supply forming in the US as mill operating rates are still around 65pc.
Exports
The daily Davis Index for Turkish imports for US-origin HMS 1&2 (80:20) declined to $287.50 cfr on Oct 5 due to sluggish negotiations in the Turkish import market resulting from a wide gap between offers and active mill bids. Turkish mills are targeting lower prices as domestic rebar prices softened.
Other export destinations such as South Asian countries are experiencing lower bids amid weak finished steel demand. Japanese export scrap prices have also decreased, making their inventories and regional proximity more attractive than US-origin scrap.