Bearish Sentiment – July’s Scrap Market
The bearish outlook came into focus after the delayed start to July’s ferrous scrap metal trading finally kicked-off in Chicago. The negotiation period was prolonged by scrap dealers’ resistance to accept buyer’s offers. Ultimately, steel mills secured cut grades and steel turnings at a discount of $30 per gross ton and primes down $135 per gross ton. Mill outages, high scrap inventories, and shrinking order books have all been factors in the bearish market that has been on a downward spiral since March’s peak.
Prime grades, including No. 1 Bundles and Busheling, dropped 22% month to month pushing prices back to levels the Chicago market has not seen since January 2021. Primes downward momentum was fueled by the recent hot-rolled coil (HRC) price drop. HRC’s prices dipped $250 per short ton since June 1st and are still chasing the bottom. Cut grades held up better than primes due to recent sales of No. 1 and No. 2 Heavy Melt to Turkey. The upswing in export demand defied the market’s bleak prognosis and kept cut grades from dipping steeper then July’s 7% price drop.
The ferrous scrap metal market should have bottomed, however, the bear run is forecasted to continue into August. Chicago’s scrap metal market will be impacted by the upcoming river closer scheduled between August 4th – September 14th. During the scheduled closures, no vessels will be able to pass through the affected locks limiting August sales in Chicago to steel mills accessible by truck and rail.
Across the board non-ferrous commodities traded down the first few days of July, with copper closing at a 20-month low on July 6th. News of a Chinese $220 billion stimulus package bolstered the outlook for non-ferrous metals in particular, copper, which jumped almost 5% on both the COMEX and LME on July 7th. The stimulus money is said to be earmarked for infrastructure spending, which if in fact is truly the case, metal prices may maintain the recent boost. However, experts think this will be short lived rally. An increase of activity in China will prop up prices in the short term but the fear of a global economic downturn still looms large. Scrap metal prices will be unable to withstand this recent spike in value if the global situation remains unchanged.
Domestically, non-ferrous consumer’s demand has remained unchanged week to week with consumers spot buying material on a need basis and pushing delivery appointments out over 6 weeks. US stainless steel metal prices narrowed the first week of July following the weakening of nickel, ferrous scrap and ferro-chrome prices worldwide. 304 stainless steel continued it’s bear run dropping 25% throughout June.
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