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Is ferrous scrap market set for a February pause?

By Bill Beck - January 17, 2017

After one of the strongest quarterly showings in the past five years, the North American ferrous scrap market may be in for a February pause so that everybody on both the buy and sell side of the equation can catch their breath.



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

97

Percent of all respondents who believe the January market will be up – or sideways at worst. About 92 percent believe prices will be higher (typically $20 or more at current pricing levels). About 5 percent say a sideways market could occur. Somewhat less than 4 percent say there is a chance the market could decline, although not by much.

10

In every one of the past ten years, January has moved in sync with December market directions, although not necessarily in amount. December was up this year, and respondents are extremely confident January will be as well. What links the two? Perhaps seasonal and weather issues combined with trends in exports.

70

The Scrap Trends Outlook Indicator number for dealer inventory. Respondents seem certain that mills will need more scrap next month for a variety of reasons, but scrapyard inventories will be low. Some see this as a normal seasonal adjustment, while others are more hopeful that it is a sign of a stronger recovery for scrap value overall.

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 June stacked up against actual changes in last month's market.

Prime Grades

December Review
December Review
December outlook:
Bullish (74.9)
December's actual change:
Busheling: + $42/18% 
Bundles: + $42/18% 

Cut Grades

December Review
December Review
December outlook:
Bullish (74.3)
December's actual change:
No. 1 HM: + $43/21% 
P&S: + $39/18% 

Frag Grades

December Review
December Review
December outlook:
Bullish (80.2)
December's actual change:
Shred: + $42/18% 
 

Foundry Grades

December Review
December Review
December outlook:
Bullish (73.3)
December's actual change:
Punchings: + $38/9% 
Misc. Foundry: + $49/14% 

10 Things to Watch

Never miss what's going to happen in next month's ferrous scrap market again

Sign-up for the new free alert, 'Ten things to watch'  and we'll tell you what we're keeping an eye on for next month's ferrous scrap markets

 

1.
Local scrap supplies will be tight in January, building on the scarcity of scrap seen in the fourth quarter of 2016
 
2.
Export demand was still strong in late December
 
3.
Worsening weather should help scrap prices






 
4.
Signs of growing business confidence are emerging



 
5.
Mills continue to raise their finished steel prices
6.
The pending inauguration of President Donald Trump has stirred an excitement in the industry not seen in years
 
7.
Historical factors suggest January pricing gains
 
8.
Overall supply could begin to loosen by late January







 
9.
Mill inventory levels may be slightly higher



 
10.
The end of the holidays will decrease mill slowdowns

Notable Quotes about Next Month

" Scrap demand is solid, reflecting stronger mill order books. Supplies tightened as seasonal issues and expectations for higher prices in January limited offers."
" Domestic scrap will likely increase another $20-$30/gt as raw material prices attempt to capture more of the metal spread realized on finished steel."
" Export has gone up $20 since December 1 and domestic is sure to follow."
" Strong mill orders, low mill scrap inventory, low scrap dealer inventory."
" Increased demand and dwindling supplies equal higher prices."
" Weather will slow the flow into our yards."