After the increase in August, the first since March, momentum has come out of the domestic scrap market. Initial expectations were for another $10-$15/gt increase but that has changed as we moved through the month.

Current expectations from the domestic scrap market is for pricing to slide $10-$20/gt and give back most, if not all, of August’s increase. The variance in decline will be determined by grade and region.

Some of the reasons for the swing in expectations:

  • Lower U.S. scrap demand
  • Cancelations from U.S. mills due to revised buy plans
  • Weaker export activity caused by slowing global pricing

Despite the weaker factors mentioned above, the imported pig iron offers into New Orleans have held steady and remain at a premium to domestic prime scrap. 

The current premium of $50/mt is up from the historical premium of $15-$20/mt and expected to increase if September scrap pricing declines. This should make US prime scrap more appetizing, possibly causing a recovery in October. However, the strong declines we have seen in global iron ore and coking coal pricing of late could push imported pig iron prices lower in the near future, and I would expect that decline to be sharp.