Ferrous scrap price indicators are all pointing up

Last Monday’s better-than-expected Institute of Supply Management Non-Manufacturing report offered modest comfort to a market that, for now, looks increasingly favored from the sell side. Last week’s employment data resurrected fears that economic recovery is looking less “V” -shaped, and more “W”-shaped, whereby any evidence of a uptick is quickly followed by another downturn. The “U”-shaped recovery folks still think they’ve got it right. Have the “green shoots” of economic recovery been uprooted in favor of “green shorts”?Anyway, the ISM composite index increased to 47.0 in June from 44.0 in May, highest level we’ve seen since the financial panic that started in September 2008. Interestingly, credit card delinquencies have held fairly constant between 4.%-4.5% but note that as unemployment moved up in late 2007 (the so-called start of this recession) so did the delinquency rate - no surprise there. This year has seen a steep rise in both rates, clearly a troubling trend for a supposedly consumer-led economic recovery.

Also in the news this week, U.S. Commodity Futures Trading Commission Chairman Gary Gensler said that the agency will hold hearings this summer to consider imposing position limits for “all commodities of finite supply.” We’re not sure what all this means but the initial reaction from long-only index funds and/or sovereign wealth funds, and outright speculators, might be to liquidate certain positions thereby lowering prices for “commodities of finite supply.” We guess the focus will be on oil, blaming “speculators” and coming up with new rules without any thought to unintended consequences that will surely follow CFTC meddling. Stay tuned…

Wednesday’s report from the International Monetary Fund offered encouraging news for 2010 with their latest forecast calling for global growth rate of 2.5% next year compared with this year’s forecast of a 1.4% contraction. The U.S. is now expected to grow by 0.8% in ‘10 after this year’s forecast placed growth at negative 2.6%. An earlier IMF forecast had the U.S. at no growth for 2010.

On the finished steel side, domestic mills are talking up another round of price increases set for September that would take the Midwest f.o.b. reference price for hot-rolled coil to $500-$520/net ton. For the month of August, published sources are currently showing HR in a range of $430-$460/ton. July deliveries were figured at the $420/ton level.

And while there has been confirmation regarding August buying at $430-$460 (and higher, per Steel Market Update) it’s too early to know whether September’s $500/ton will be the new baseline reference price.

Ferrous scrap price indicators are all pointing up, reflecting fresh demand along with inventory replenishment, low generation of prompt material, scrap export demand, and reluctant sellers…this week’s Scrap Price Bulletin is showing its No.1 HMS composite prices at $195.17/gross ton, delivered, up a modest $8.34 from last week…shredded scrap was reported at $223.83/ton, and Chicago dealer bundles were figured @ $210.50/ton…

Other sources, meanwhile, are reporting much firmer ferrous scrap numbers. Again citing Steel Business Briefing, they’re reporting sales of No.1 HMS at $230/ton delivered East coast, and Midwest bushelings at $300, picked up. Others place Midwest shredded at $230-$265/ton, delivered, and Chicago No.1 bushelings at $313/ton, up $98 from June. AMM.com is reporting that No.1 HMS is up as much as $55 “in some regions.”