Steel Mills Cancel September Scrap Orders in Anticipation of October Swoon

Steel Market Update (SMU) sources reported the domestic steel mills have canceled any remaining ferrous scrap tonnage that was not delivered during the month of September. This is normal when the mills believe that they will be able to negotiate lower prices for October delivery. As reported earlier this week, the expectation is for scrap prices to decline by a minimum of $20 per gross ton and, in some regions/products, the drop could be as high as $50 per gross ton.

One of our scrap sources responded to SMU questions about what is driving ferrous scrap prices as we head into October negotiations with the domestic steel mills. He said, “…we’re certainly going to see another sharp swing down for scrap prices in October.  In addition to the usual suspects – currency, overcapacity, export/import dynamics – some of the conventional destocking associated with Q4 seems to be adding a new element to the weakness, pushing scrap down $30+/gt.  Cancellations are systemic this afternoon and the desperate efforts to find a home for scrap in October are abundant.  We’re in for another bumpy ride as we go ‘Back to the Future’ of Q4 2008, just wish I could ride it out in a DeLorean, no scratch that, its stainless…”