November Scrap Market Conditions
In November and December of most years, both ferrous and non-ferrous prices tend to be weaker as the Thanksgiving, Christmas, and New year holidays leave domestic mills with a shorter number of working days, mills reduce their end of the year raw material inventories for tax purposes, order books are lighter, vacations are taken, all of which leads to a weaker demand for scrap. We are pleased to report that contrary to early October expectations that the November domestic ferrous scrap prices would be softer, the excess scrap overhanging the domestic market has been absorbed by the sales of several bulk cargo into Turkey from the East and Gulf Coasts and additional sales into Southeast Asia from the West Coast. The domestic steel mill utilization rate rose to just over 70% last week (however it is still 12% lower than January and February of this year )and scrap flows have returned to pre-Covid levels. Purchasing Managers Indexes around the world reported readings over 50 earlier this week indicating that manufacturing activity continues to improve on most continents. Additionally, domestic and overseas demand for finished steel products continues to gradually improve. Finally, HRC coil prices in the United States are now approaching $700NT as demand increases and steel mills carefully monitor their production tonnage. Accordingly, domestic ferrous scrap prices are firming up for November as reduced scrap supplies come into better balance with projected steel mill requirements. It now appears that scrap prices around the country will settle mostly sideways, the exceptions being the East and West Coast markets that experienced $10GT price drops last month and the Chicago market where prices were below market in October. The East Coast and West Coast markets are expected to recover those drops in November and a few other isolated regions may see nominal increases where too much scrap was shipped out in October leaving a temporary shortage. As of this morning, it appears that prices in the Chicago area are up $10GT for most grades. Looking forward, December domestic scrap prices should settle at or slightly above November levels with the expectation that January 2021 prices could move higher.
In the non-ferrous arena, demand for scrap also normally declines during the last few months of the year bringing lower scrap prices. This year, the November and Decembers non-ferrous markets worldwide are shaping up to be very strong with demand for non-ferrous scrap continuing to grow and prices for most commodities continuing to rise. The non-ferrous markets got a big boost in late October when the Chinese government announced that effective November 1, 2020 copper and aluminum scrap that meet China’s new standards for renewable metals can be freely imported into China without pre-shipment inspection and without any quotas.
Aluminum continues to be the bright spot in the non-ferrous world. LME aluminum prices have shot up $100NT in the last several days. Demand for extrusions and segregated alloys is very strong both domestically and overseas. Additionally, demand and prices for secondary alloys continue to improve for most grades with the exception of aerospace alloys. The new Chinese government’s standards for aluminum scrap plus the continued rebound in the automotive sector are the driving forces behind the resurgence in the demand for aluminum scrap.
In the red metal world, LME copper prices rose to $3.20 a pound last week, the highest level in over 30 months. LME copper prices have backed off in the last few days but are expected to remain in the range of $2.85 to $3.30 a pound hopefully without the pre-election daily volatility (up to $0.15/pound) the markets have experienced during the last few months. With the relaxation of standards for scrap copper permitted to be sold into China effective November 1, Chinese buyers have been aggressive pursuing copper and brass scrap. China’s return to the red metal scrap marketplace has dramatically increased the competition for copper units as China consumes over 50% of the world’s copper units. Scrap copper and brass prices have risen accordingly.
LME nickel prices have climbed back above $15,000 per ton and seem to have found a narrow trading range. Domestic stainless steel producers have decent orders on their books for November and December but are not expected to aggressively pursue scrap for the rest of the year as their existing inventories are adequate for current production. 300 series stainless steel prices are therefore expected to remain at or around current levels for the rest of 2020.