Ferrous scrap markets are slowly improving as the flow of scrap into mills appears to be in a good balance with new steel demand. Ferrous prices saw a slight improvement in April and are seeing a “sideways” or unchanged market across most of the nation in May. This further reinforces that we have indeed reached the bottom of the market. Now it appears to be a waiting game for some “game changers” to provide a stimulation and push ferrous markets back into a positive growth direction. These game changers are most notably related to the strength of the US Dollar. As the dollar weakens, the import of cheap iron ore and semi-finished products will become less attractive thus placing added pressure on the mills to use more scrap consequentially raising scrap prices organically. This coupled with less imported new steel products will assist in raising the current ceiling placed over domestic scrap markets. Without movement in these key areas, markets will continue to sit at current lack-luster levels for the seeable future.
There have been reports of a slight uptick in sales to Turkey on the East Coast while “bookings on the West Coast remain lifeless”, as reported by the AMM. If the dollar were to weaken, exports to Turkey and Asia would likely increase and also place more pressure on the domestic mills to price scrap at higher levels in order to keep it domestic further aiding the cause to raise the ceiling on the domestic markets.
If you get motion sickness then you might be feeling a little nauseous from the roller coast ride we have been on with base metals over the past 30 days. Aluminum scrap prices are the big story at the moment, feeling very déjà vu compared to the scrap ferrous market. There has been an influx of cheap billet imports which have flooded the domestic market and put pressure on scrap prices. In addition, the premium surcharge that mills add to new aluminum products has been cut in half recently causing mills to lower scrap prices as a way to gain back this lost margin they historically enjoyed during their sales. Like steel, aluminum scrap will be dependent on a weaker dollar to slow the impact of cheap imports before we can anticipate a rebound. Nickel prices gained 10% on the LME by the end of April even though scrap prices on stainless remain unaffected simply due to low demand. If you are one of those “glass half full” people then there is one silver lining amidst all of the craziness and volatility. Copper is the shining star as it has continued to gain momentum with prices steadily on the rise. Copper is up almost 6% since the beginning of April and continues to rise as China has re-entered the market and demand is up.
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