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June scrap could see decreases if demand flattens

By John Ambrosia - May 23, 2016

With export demand and mill output seemingly remaining in holding patterns heading into June, the early consensus emerging in the market is that next month will see a decrease in prices, at least on the secondary grades.



Industry Survey of Factors Affecting the Upcoming Market

Imagine having advanced notice of what your allies, competitors, peers and clients are thinking about what's to come in each new monthly scrap market. Scrap Trends Outlook, delivers an exclusive look at where prices, supplies, demand and other factors may be heading. Each month, Scrap Trends Outlook gives you a chance to listen in on the emerging industry conversation about the upcoming scrap market and provides a comprehensive tool for buyers and sellers to gaze into an industry consensus of where the price and availability of scrap may be heading.

Numbers and Letters

A quick look at key points expected to affect next month's markets

1

After experiencing the lowest monthly totals of the twenty-first century in January, U.S. ferrous scrap exports nearly doubled in
February, to just over 1 million tonnes. In March that figure fell about 3.5 percent, to just under 1 million tonnes. The feeling is that export demand has continued its stagnation into the second quarter.

84

Most respondents – 84 percent – to the survey expect prices to be down to a soft sideways to sideways in June, while only 16 percent expect to see price increases. P&S and shredded scrap are the weakest grades heading into next month, although there is a little more enthusiasm for the fate of prime grades, all of which could actually be stronger or up.

56

The Scrap Trends Outlook indicator number for historical pricing. During the past 10 years, prices fell across the board in only two of those June markets – 2010 and 2012. In three of those years, prices rose across the board. June has been a month in which mixed pricing changes are most likely to occur, fitting in well with this month’s survey results.

Our Methodology

Scrap Trends Outlook Methodology: A numerical value is given to the overall trend for the upcoming month after all the survey results of a series of 15 indexes are calculated based on a weighted average. A number close to 50 will give a ‘sideways’ or ‘unchanged’ reading, while numbers above 50 will give a reading for a bullish trend. The closer to 100, the more likely it is that prices will trend upward. Conversely, a number below 50 will give a reading for a bearish trend. The closer to 0, the more likely it is that prices will trend downward. N/A means there were too few survey responses to publish a reliable figure.

Taking Account

A look at how Scrap Trends Outlook Index numbers for April stacked up against actual changes in last month's market.

Prime Grades

May Review
May Review
May outlook:
Bullish (71.8)
May's actual change:
Busheling: + $38/16% 
Bundles: + $37/16% 

Cut Grades

May Review
May Review
May outlook:
Bullish (69.8)
May's actual change:
No. 1 HM: + $27/12% 
P&S: + $28/12% 

Frag Grades

May Review
May Review
May outlook:
Bullish (72.1)
May's actual change:
Shred: + $27/11% 
 

Foundry Grades

May Review
May Review
May outlook:
Bullish (65.7)
May's actual change:
Punchings: + $24/5% 
Misc. Foundry: + $29/8% 

10 Things to Watch

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1.
Export is expected to be weaker, especially from Turkey, but also with a downward push from Asia
2.
Summer slowdowns could diminish mill output
3.
Finished steel sales remain historically weaker
4.
Historically, June has been a sideways-to-strong month
5.
Service center demand is expected to be stable
6.
A slight price dip took place in mid-May, a potential sign of sideways-to-lower values heading into June
7.
Too many players could be chasing too little prime scrap
8.
Local inventories may begin to increase
9.
Raw steel capacity utilization rates are still uninspired
10.
Mill inventories and home scrap may be steady

Notable Quotes about Next Month

" Scrap prices could find support for another 45 days or so, just off of recent peaks, due to the reduction of imported steel coming in coming weeks compared to past levels."
" Depending on the outcome of the 337 petition the market could swing dramatically in one direction or another."
" Steel prices continue to spiral upward with no end insight. Scrap prices will be following on their coat tails."
" Without any significant export sales, there is little else to prop this market."
" (Fewer) mills to sell in the Midwest. Export price trends weakening."
" Stability needs to enter the market now."