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United States

While most saw a potentially weak US recycled steel market back in October last year, there was an abrupt turn as November and December proved to be strong months for dealers. Flows are generally reduced in the USA in late November and December as holidays, winter weather and interruptions such as the hunting season affect collections. Steel mills are well aware of this and plan ahead. The desire to secure tonnage before potential bad weather in January led several mills to adopt strong buy programmes in November and December, driving up prices by almost US$ 70 per ton as dealers rationed limited volumes. Prime grades led the rally in support of hot rolled coil (HRC).

In what had been a supply-driven market, recycled steel dealers temporarily had leverage on prices and drove them higher. All in all, it was a true “Santa Rally”.  

Export was also supportive as the Turkish market saw an extended price rally on tight availability. Turkish prices had bottomed in early November at below US$ 360 per tonne before rallying above US$ 420 by December, a price that remains close to the levels prevailing at the time of writing.

That was supportive of US East Coast recycled steel prices, and the same happened in Asia on similar fundamentals to support US West Coast pricing. Prices in Taiwan and Vietnam rallied on tight scrap availability and higher US prices. Asian prices remain close to those levels at the time of writing, although Chinese New Year has put a temporary halt to any additional activity. While the export rally was supportive of recycled steel prices in the fourth quarter, they appear to have peaked for now in a stalled market. 

US economics remained supportive of pricing in last year’s final quarter as HRC orders were boosted by demand for vehicles following the UAW strike. While demand was not excessive, limited recycled steel supplies helped to drive up the price of HRC to more than US$ 1100 per ton by early December from lows south of US$ 800 in early autumn. Mills were willing to pay more for recycled steel to accelerate and maintain those higher HRC prices and attempted to target US$ 1200 per ton, but that price was never really attained as overall weak demand and significantly lower-priced imports held HRC in check.

December weather continued to be a factor in the US recycled steel market but proved to be negative for dealers’ future pricing power. The month’s milder-than-usual weather, with temperatures well above normal and limited snow, saw scrap flows increase at most dealer yards, contrary to earlier expectations. While expectations were still positive for recycled steel increases in January, the additional tons weighed on prices. Mills saw an opportunity to stem the rise in recycled steel prices, with most ending sideways or dropping by US$ 10 per ton. Recycled steel prices appeared to have been front-loaded in November and December, limiting any additional increases in January. The bloom now appeared to be off the rose for February as limited demand and new steel prices that were starting to peak were not supportive of additional recycled steel price increases. 

In February, market sentiment has shifted. Minimal restocking has exacerbated the drop in HRC prices to below US$ 1000 per ton. Service centres are reluctant to buy for anything other than hand-to-mouth needs as they anticipate lower levels already reflected in HRC futures index pricing.

Despite some continued tightness in obsolete grades of recycled steel, mills are not hesitating to reduce prices as they watch their margins start to shrink on lower new steel prices. One mill has already dropped the price of new steel structural plate by US$ 50 per ton, so the impact is not just on sheet products like HRC.

The US economy has shown great resilience and is by far one of the stronger economies in the world post-COVID, but overall data continue to be weak on higher interest rates. While there is some exuberance surrounding the potential for future Fed rate cuts, stronger-than-expected data in the jobs market say otherwise for now. The lack of interest rate cuts in a still-slowing economy will continue to erode future demand as consumers adjust to less access to capital in the first two quarters. While expectations are for a no-recession economic landing, there are limited rate cut expectations before this summer. Summer also sees the beginning of a generally weak time for demand and is usually less supportive of new steel and recycled steel prices.   

While the market may potentially soften in the first and second quarters, there are also new electric arc furnace projects coming online as early as this summer. While these will not increase consumer demand for steel, they will displace some older production and will require 100% recvcled steel. That will be positive in the long term for dealers.

Additionally, a still relatively healthy US economy and lower new steel prices by the summer should lead to some restocking and hopefully better demand in the second half of this year. That should help to make it another good year for recycled steel dealers.