The US domestic ferrous scrap trade for March is expected to begin Tuesday or Wednesday, and with price increases of $10-30/gt above February settlements for all scrap grades based on region.
The upside follows typical seasonality and is higher than earlier predictions of a sideways March market. Scrap flows are adequate and mill order books are strong throughout most domestic markets.
The highest prices are expected in regions near the East Coast because export activity and prices strengthened last month, improving surrounding markets. Scrap export pricing, which recovered about $30/mt or more over the last four weeks, along with stronger domestic mill demand, including steel inventory staging before planned April mill outages, are also driving March sentiment.
Market sentiments in Ohio Valley and Pittsburgh are the most bullish, as they are positioned for up to $30/gt price increases due to their proximities to the East Coast. At least four mill buying programs in the areas are expected to be larger in March than in recent months, contributing to the outlook.
However, the Detroit market, which may begin trading Tuesday, is expecting price increases of $10/gt because mill buying programs in the region have shrunk.
The Chicago area, like Detroit, similarly expects price increases of $10-20/gt with area mills buying slightly reduced amounts of scrap. With smaller mill buying programs, Detroit and Chicago scrap may not trend as high as surrounding markets, especially those east of them.
The South and Southeast regions reported that trading probably won’t start until Wednesday.
Market participants project steel prices will remain around current levels, and that they will be supported by supply and demand this month. HRC mill lead times are at five to six weeks with prices at $550-580/nt ($606-639/mt) fob.
The $10-15/gt spread between prime and shredded grades is expected to remain flat in March compared to the approximate $5/gt gap seen in January, as prime grades generally decreased less than obsolete grades did in February.
Covid-19 could pose a risk heading into spring if China redirects excess finished steel to the export market. There could conceivably be increased competition for global scrap-consuming mini mills, while export demand would weaken.
Balanced supply and demand, along with March steel price increases, are in line with expectations, while a stronger construction industry has offset weakness in the auto industry. Supply chain inventories have increased since early 2020, and steel restocking has improved.
Early April sentiment projects flat prices, rendering March the market peak, at least for the time being. Warmer weather and continued supply and demand balance are projected for the April market.