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Mills have decent orders to fill starting in the new year and they came up short in covering their needs during the December buy, which is the perfect layup for higher January prices, according to sources.
“Everyone knows January will be up, so it was a thinly traded trade, and there is more upside, as mills didn’t cover,” a seller into Indiana said.
A second seller into Indiana said mills “did not cover on shredded requirements and will have to buy cut grades to cover the shortage. The mills had to raise the market in December, which they didn’t expect.”
Said a Midwest seller on December 9, after the market had settled: “The mills are all calling me three times a day and begging for scrap. They are all scared. There are some mills that are quite desperate.”
The problem with agreeing to ship extra December tons is that there is not enough time and too much risk. If a recycler agrees to ship and cannot fill the requirement, he will risk having to pay up in January to complete the December order.
In the December trade, prices for cut grades and shredded scrap improved by $20 per gross ton, and the price for No1 busheling improved by $30 per gross ton in most regions. It was the first scrap price increase in the Midwest since March or April, depending on the grade.
In Alabama and Arkansas-Tennessee, shredded increased by $30 per gross ton. Shredded scrap and plate and structural scrap are both in short supply.
Ferrous scrap prices also showed signs of a return to normalcy, with Midwest mills paying $10 per gross ton more for prime scrap than shredded scrap.
Buyers and sellers seem eager for busheling to resume selling for a premium over shredded scrap. Shredded has been selling for more than prime in many cases, and this has become a nuisance at mill meltshops.
“It has caused headaches in the meltshops because people are hiding busheling in the shredded scrap and hiding plate and structural in the busheling. It is time to get prime back on top,” a prime scrap seller into the Chicago area said.
A mill buyer expects prime to outperform shredded in January. “Either shred will decrease or prime will jump over shred, which seems more likely,” the mill buyer said.
Said a seller into Cleveland on the increases: “It was the perfect move for December and setting it up for a similar move in January.”
Some sellers are hoping for a repeat of December, but a second mill buyer said talk of prices up $60 per gross ton for December and January combined is “overhyping.” This buyer added that mills are willing to share but are not prepared to give the entire price increase on hot-rolled coil away to dealers.
HRC prices have rebounded on the suggested $60-per-gross-ton increase, and scrap sources indicated that another increase will soon be announced.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $34.00 per hundredweight ($680.00 per short ton) on Friday, December 9, up from $32.38 per cwt ($647.60 per short ton) on Tuesday, November 8
In November, it became obvious the market had bottomed. Shrinking raw material inventories, a robust export market in volume and selling prices, and mill price increase announcements on HRC all worked to spur the rebound.
Fastmarkets’ steel scrap No1 busheling, index, delivered Midwest mill was calculated at $389.61 per gross ton on Monday, December 12, up by 8.31% from $359.72 per gross ton in November.
The steel scrap shredded, index, delivered Midwest mill was calculated at $393.96 per gross ton, up by 5.91% from $371.96 per gross ton in November, and the steel scrap No1 heavy melt, index, delivered Midwest mill settled at $307.96 per gross ton, up 7.35 % from $286.88 per gross ton in November.
Shredders quickly responded, raising shredder feed prices in all regions.
Fastmarkets assessed the price of steel scrap shredder feed, fob Midwest at $125.19 per gross ton on Monday, December 12, up by 9.25% from $114.59 per gross ton the week prior.
Fastmarkets assessed the price of steel scrap shredder feed, fob Ohio Valley at $153.78 per gross ton, up by 7.58% from $142.95 per gross ton on December 12.
Fastmarkets’ price assessment for steel scrap shredder feed, fob Southeast was $130.84 per gross ton, up by 7.09% from $122.18 per gross ton on December 12.
What’s next for steel scrap prices? Join leading scrap industry experts and make new connections across the supply chain in Dallas at Scrap & Steel North America on January 17-19. Register today.