Posted on 20 Jul 2023
The US market for steel and ferrous scrap is in a “normalising” mode in the third quarter but faces “lacklustre” order activity, Kallanish learns from the Bureau of International Recycling’s (BIR) quarterly report to members.
BIR ferrous division board member George Adams of SA Recycling (USA) writes that low scrap intake at the recyclers may help keep prices mostly sideways in some regions this summer. The domestic consumption outlook is in question, however.
“Steel service centres have been reluctant to restock in the wake of potentially falling new steel prices and weakening demand,” Adams says. “Add to that lower-priced new steel imports, and new steel sales are at best lacklustre.”
Tumbling prices in the second quarter in Turkey and Asia, plus unfavourable weather and poor air quality due to fires in North America, have stymied recycling intake and the near-term supplies available. The scrap sector is also recovering from market dynamics earlier in the 2023.
“Falling new steel prices and weakening order books, primarily at sheet mills, took their toll on recycled steel processors. While some saw it as a collapse, in reality it was more a normalisation after a highly inflated market driven by restocking pushed hot rolled coil prices too high in the first quarter,” Adams argues.
“The inventory of recycled steel was also limited and is decreasing,” Adams points out.
Much of the current slowness in demand can be attributed to the normal “summer doldrums” that perennially constrain the steel market during the hot-weather holidays, he says. Any improvement in the demand for scrap by autumn has the potential to buoy pricing unless macroeconomic factors intervene.
Adams explains: “If the market is ‘normalised,’ we would expect restocking to occur by the mid to late third quarter. That slightly increased demand, as in quarter one, will be met with limited recycled steel supplies. Dealers’ yards are now low to empty and intakes are slow at best. That should hopefully set up the US recycled steel market for another short-term rally.”
However, “we should not take that potential rally as a turnaround in the market. Economics remain weak and the Federal Reserve may not be done raising interest rates.”
Source:Kallanish
