For US scrap dealers, March came in like a bull. Prices moved up $10, $15, $20/lt, and even more in some cases. It had been a while since US scrap dealers had the sort of leverage they did during the March buy week.
If we consider each buy week a battle between dealers and mill buyers, then the dealers’ record in 2015 was 2-8-2.
To put in March Madness terms, each month scrap suppliers entered the buy week as a No. 14 seed facing a No. 3 seed (also known as the mill buyers). And for those who don’t know about March Madness, it’s best summed up as a month-long celebration of collegiate basketball and filling out brackets in an attempt to predict who will reign supreme at the end of the tournament.
This was hardly the fault of the scrap suppliers. There wasn’t much scrap supply needed as steel mills dealt with myriad obstacles when it came to selling their products. And the little demand for scrap that existed was sometimes filled by scrap flooding in from Canada, the East Coast and even Europe.
But things were different in March.
First, let’s back up for a minute. In what may seem like an odd business model, many of the scrap-intensive electric arc furnaces in the United States are not near large reservoirs of scrap.
Many were built in the South in the middle of the 20th century when scrap was easily available and cheap. They took advantage of attractive energy deals from local counties and access to cheaper labor than in the North.
Others had the same idea. Minimills proliferated and, of course, began to chase the same scrap metal, driving the price up.
Luckily, most Southern EAFs were built with access to rivers and rails where — ideally — scrap would flow from the North. And historically it has flowed, from scrap surplus areas like Chicago and the Northeast.
In March, mills had trouble drawing from those scrap surplus reservoirs.
Canadian mills, which had been losing much of their local supply of scrap to the US as dealers took advantage of a strong dollar, aggressively raised their prices to keep material home. Chicago integrated mills had appetites too and kept material home. Turkey was a big influence in the market, booking numerous cargoes of US East Coast scrap at competitive prices, which kept Northeast material home and drew inland material to the shores.
The final piece to the puzzle was the slightest increase in mill demand.
No longer able to pull scrap from coastal regions, Canada or Chicago, mills had to raise prices to secure local scrap and pay even larger amounts to springboard material from other regions.
After achieving a price bump in January, seeing sideways pricing in February and getting another increase in March, scrap dealers are 2-0-1 in 2016 and starting to look much stronger than a No. 14 seed.
March came in like a bull for scrappies and is showing no signs of going out like a lamb.