May ferrous market signals not yet clear

With steel output in the United States remaining below 2022 levels, a disinterested export market could mean ferrous scrap prices are poised to drop by $20 per ton or more in the early-May buying period.

Davis Index says its initial conversations with buyers and sellers in the U.S. have it projecting $20- to $50-per-ton declines in May compared with April (depending on the grade and region). In this scenario, mills are predicted to make smaller scrap purchases in May after having restocked in the first four months of this year to recover from end of 2022 inventory clear-outs.

At the same time, buyers in Turkey and the Indian subcontinent seem poised to add to the misery by having likewise lowered their bids for U.S.-sourced scrap as April turned to May.

According to Davis Index, buyers arranging deliveries of heavy melting steel (HMS) scrap to ports in Bangladesh, India and Pakistan typically were paying $5 per ton less May 3 compared with late April. Some May Turkish deliveries were holding steady while others also were dropping by around $5 per ton.

However, at least one trader tells Recycling Today the pressure to lower scrap prices might not hold for long with economic conditions and steel consumption holding steady in several of the world’s largest economies. With the Ramadan holiday having ended, he predicts the price drops will prove short-lived.

“We’re going to see Turkish prices move up again [after] Ramadan because buyers need to buy,” he says. “The first two or three buyers will luck out and get their cargoes at the current bottom, then we’ll some sellers backing off holding out for better prices realizing we’re on the move again.

“India won’t have much of a choice and will also move their prices up as a result of the U.S. East Coast sales moving up, and eventually the U.S. domestic mills for May will also kick it up a few notches.”

On the supply side, several processors attending the 2023 Institute of Scrap Recycling Industries (ISRI) convention in Nashville, Tennessee, in mid-April indicated to Recycling Today that their 2023 inbound material flows remain below 2022 levels, or stable at best.

The modest scrap flows seem to match modest domestic steel production figures thus far in 2023, though the global market is sounding a few positive notes.

Through the first four months of this year, the Washington-based American Iron and Steel Institute (AISI) says year-to-date production in the U.S., at around 28.4 million tons, is down 4.4 percent from the nearly 29.7 million tons produced in the same time frame in 2022.

In the final week of April 2023, mills in the U.S. operated at 76.3 percent of capacity and enjoyed a modest uptick in output, producing 0.9 percent more steel than in the prior week.

Globally, the Brussels-based World Steel Association (Worldsteel) says steel production in the 63 countries reporting to it was up by 1.7 percent in March of this year compared with March 2022.

The good news for U.S. scrap processors is that three of their major markets all display some signs of optimism. Perhaps most importantly, while extra workdays likely contributed to increased output in the U.S., healthy demand also could have played a role in domestic steel output growing by 11.7 percent in March 2023 compared with the prior month.

Also in March, Indian steelmakers produced 11.4 million metric tons of steel, a 14 percent increase from the 10 million metric tons made in February, Worldsteel says.

In Turkey, the largest export market by volume steel output rose 28.6 percent month to month, from 2.1 million metric tons this February to 2.7 million metric tons in March. The country’s scrap-fed electric arc furnace (EAF) steel mills are rebounding from and responding to the damage suffered from devastating earthquakes in February.