US steel scrap export drought, rains on pricing parade

Steel scrap is an incredibly unique commodity.

We all have an impact on the demand side of commodities, whether you are building a house, filling up your gas tank or shopping at the grocery store.

When it comes to scrap, almost every person on earth can say they also have an impact on the supply side.

How many people can say that about oil? About coffee? About natural gas, gold, wheat, cotton, corn, sugar? You get the point.

When you retire your vehicle to buy a new car, discard an old washer, recycle a beer can, you are adding to the worldwide scrap reservoir.

And because of the incredibly fragmented, long-winding scrap supply chain, we often overcomplicate things when trying to quantify the current supply situation.

Just about every single possible weather condition comes with some perceived psychological impact on scrap supply.

Too cold, scrap won’t flow. Spring thaw, scrap coming out of the woodwork. Too hot, scrap won’t flow. And on and on we go.

I was in New York last week for the observance of Steel Week and it was hot. I’m in Houston this week and it is even hotter.

Steel mills in the US are running at about 75% capability utilization. Not bad. Electric-arc furnace flat-roll mills that gobble up much of the scrap here in the US are running even better.

So why are scrap prices under pressure? Scrap pricing fell in June and the early talk for July is more downward momentum.

The US has the largest scrap reservoir in the world but is only the fourth largest steel producer on the planet. It’s easy to see why the US is a scrap-surplus country and our trash, aka scrap, is the rest of the steelmaking world’s treasure.

But for a five-week span, for the better part of May and into June, the US was not selling any bulk cargoes of scrap to foreign mills. It was believed to be the longest such drought this decade.

Sometimes the complicated supply/demand economics of steel scrap can be summed up easily: If the US is not exporting scrap to the rest of the world, there is plenty to go around here at home.

Right now, our scrap is no one else’s treasure.

Source: http://blogs.platts.com/

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