Steel scrap prices
Previously, we’ve looked at the recent trend in iron ore and coking coal prices. In this article, we’ll see how steel scrap prices are playing out in the United States. Integrated miners like U.S. Steel (X) and ArcelorMittal (MT) mainly use iron ore while minimills like Nucor (NUE) and Steel Dynamics (STLD) rely more on steel scrap.
Scrap versus steel prices
For US steel producers, steel scrap pricing is a bigger driver than seaborne iron ore prices. Steel scrap prices have fallen in September. The above graph shows the movement in spot HRC (hot rolled coil) prices plotted against benchmark-shredded scrap, according to data compiled by the Metal Bulletin. As you can see, spot HRC prices have been moving in tandem with scrap prices.
Steel scrap prices could be close to their near-term bottom. Spot HRC prices should find their bottom around the $500 per short ton level, which could prevent the downside in steel scrap prices.
Furthermore, the newfound strength in seaborne iron ore prices could also help US steel scrap pricing. Although US scrap prices don’t follow seaborne iron ore prices in the short term, over the medium term to long term, changes in alternate raw material costs tend to impact the overall dynamics.
So far in this series, we’ve looked at the trend in steel and steelmaking raw material prices. It’s important to note that metal prices (DBC) are impacted by the underlying demand-supply dynamics.
In the coming parts of this series, we’ll see how steel demand and supply indicators look this month. Let’s begin by looking at August global steel production in the next part.