United States

2024 has not been an average year for US recycled steel prices. Traditionally, there are both up and down months for market prices but, so far this year, dealers have faced five downward markets and one sideways market. This trend appears to be continuing in July as weak fundamentals continue to put downward pressure on recycled steel prices.

Hot rolled coil (HRC) pricing has been the catalyst for this downward pressure on recycled steel. With sheet steel being the dominant grade in new steel production in the USA, it plays a pivotal role in recycled steel prices. Unfortunately, there has been an ongoing trend of falling HRC prices driven by weaker demand. This is in a market environment where the Federal Reserve has been trying to slow inflation with higher interest rates, and it is working. Consequently, consumer demand has been slowing.

Mills have been competing to keep furnaces running by cutting prices. HRC was well over US$ 1000 last year but is now below US$ 700 and a floor, while close, has not been solidified. Lead times are short at three to four weeks, leaving steel service centres the luxury of waiting to do any substantial restocking.

The trend of falling prices has only been exacerbated by the “summer doldrums”. While the US economy has been slowing, it is by no means dead; consumers continue to spend at near-record levels, but not on metal-intensive goods. It is summer and consumers are on vacation in record numbers, spending on food, travel and recreation. This has added to the slowdown in sheet steel demand, the grade that has the most impact on recycled steel prices.

On a bright note, the rebar market has remained relatively steady. After a slowdown in construction activity owing to a very wet early summer, rebar demand has improved slightly as construction sites have dried out and work has moved ahead. While forward demand remains weak, there is still an overall demand. This is reflected in the price of rebar holding steady, now almost US$ 100 higher than HRC.

On a positive note for recycled steel prices, the slowdown in new steel demand and falling prices have been met with a comparable drop in recycled steel collections. While lower volumes are a negative for dealer margins, they have kept recycled steel levels low and matching the reduced demand. There is no surplus of recycled steel in the market and those levels continue to drop. Another summer of record heat in the USA has curtailed collections by 20% to 30% in some regions. The anticipation is that recycled steel volumes will be inadequate to meet demand by the end of summer when consumers come back and steel demand would be expected to see some increase. With new electric arc furnaces coming online and with increased usage of recycled steel in line with green steel initiatives, recycled steel should be poised for some future price gains.

The slight recycled steel deficit has also been supportive of prices in the international market. The USA has seen an increase in export tonnages as coastal prices have been forced upwards on international demand for recycled steel. While not due to increases in consumer demand, it reflects a growing deficit in recycled steel availability whereby US and international mills are competing for the same tons.

Turkey has purchased additional volumes of recycled steel from the USA at slowly increasing prices as European availability tightens. While demand for new steel has been lacklustre, a lack of recycled steel availability has been supportive of prices. In what should be a slowing summer market, recycled steel prices in Turkey have risen incrementally. The Asian market has also been supportive of recycled steel prices owing to limited availability. While weak orders have capped the upside to recycled steel prices, there has not been the substantial downside that would normally be expected owing to summer heat, rain and energy restrictions. In addition, the US West Coast has seen support in the bulk cargo market that is keeping prices competitive with US consumers. All of this speaks to a recycled steel market that appears to be in balance, although being driven to an eventual deficit if trends continue.

Despite falling HRC prices and weak summer demand, recycled steel prices are resisting downward pressure in July and look to be sideways for a second month this year. After seven calendar months so far in 2024, that makes two sideways markets and five down markets for recycled steel. While this would not have been the dealers’ preference by far, it could have been worse.

Markets appear to have some level of normalcy with the summer slowdowns and are on pace to hopefully see some recovery when consumers come back from vacation, although that is still several months away. The good news is that, if in fact markets have returned to post-COVID normality, there should be some restocking in the late third and early fourth quarters. That restocking would be met with less recycled steel in the market and potentially higher prices. We shall see.