Slightly stronger scrap may/may not push steel prices up

While few believe that the domestic steel industry will show any meaningful recovery for quite some time, the same folks do see recovery in ferrous scrap prices from the lows we saw in the final months of last year. Reasons cited include lower supplies of both prompt and obsolete material along with some recent offshore buying. Consequently, research firms such as Canaccord Adams believe that December 2008 may well prove to be the bottom for scrap prices.

Along with relatively tight scrap supply, the Canaccord Adams analysts also cite low domestic steelmaking and decade-plus low service center stocks–thus suggesting potential fresh buying for inventory purposes. In sum, this year, they believe, will feature limited scrap supply and higher end-use demand underpinning the ferrous scrap market going forward…

As noted by KeyBanc, most of the market researchers concerns center on the macro side and include everything from geopolitical turmoil to miscalculating the size and timing of China’s recovery, all of which may outweighing the domestic steel industry’s “supply discipline and adherence to profit orientation…”

Latest price indications from several published sources place the Midwest market for hot-rolled sheet in coil anywhere from $520 - $545/net ton, f.o.b. with No.1 Heavy Melting Steel scrap prices inching above the $200/gross ton mark, delivered…shredded scrap figured ranging between $241 to $260, with Chicago bushelings placed at $252 - $253, delivered. Others in the Northeast are reporting $260 delivered for shredded scrap. American Metal Market (AMM) also made several upward adjustments to their St. Louis region prices. All sources showing firmer price, for sure, supported by increased export activity and perceived supply tightness credited to low generation; mill order books, however, remain a bit of a mystery.