Upward US steel scrap price momentum carries into January

 The January US ferrous scrap market began to take shape Tuesday, as upward pricing momentum that started in mid-December appeared to persist into the New Year.

Mills spurred a price rise starting last month when they tried to secure early tonnage commitments ahead of any potential January price increase. Additionally, fourth-quarter mill scrap destocking has generated increased first-quarter demand.

"Dealers want to sell; mills want to buy," one mill buyer said. "I think we will [finalize January] trade Wednesday or Thursday. I think it will settle at $20 up."

Based on indicative bids and offers during early January negotiations, Platts raised its daily US shredded scrap assessment Tuesday to $185-$195/lt delivered Midwest mill. The midpoint is up $5/lt day on day and up $15/lt since December 9.

A Southeast dealer anticipated shredded scrap prices settling around $195-$205/lt delivered mill this week in that region.

"Initial rumblings are definitely stronger, up $15+/lt across most grades," the dealer said. "However, both buyers and sellers remain tentative as uncertainty around steel demand, imports and scrap exports prevails. I'm anticipating a move of up $20-$30/lt given the return of the EAF flat roll producers to the market."

There was no downside potential forecasted by market participants so far this week, but the extent and duration of the price upswing was debated, as domestic mills operate at capacity utilization rates around 60%.

"I don't know that there is a fundamental market reason for the number to be up except for wishful thinking," another mill buyer said. "Sometimes wishful thinking wins out in the short term. From a mill buyer's perspective, the longer you wait, the better chance it will come back to a sideways market. If you have to do something [Tuesday] or early on Wednesday, you'll probably pay up $20."

A dealer agreed, adding that "early tons will be the best sales," from his perspective.

A trader said the duration of the price upswing was more closely tied to supply. "I think there is more longevity in the market," he said. "If there isn't scrap supply built up somewhere, it is going to take some time to rebuild."



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