Scrap Prices Expected to Increase by $20 per Ton

The U.S. ferrous scrap market is showing signs of upward pricing movement for the first time in months. After a year marked by mostly stagnant or declining prices, scrap processors are anticipating an increase of up to $20 per ton for January 2025. According to Davis Index, the need for steel mills to restock their inventories at the same time as winter weather disrupts scrap generation and collection is driving the price pressure. In regions impacted by severe winter conditions, some processors are even opting to withhold tonnage in anticipation of higher bids. As the need for scrap intensifies, buyers who initially refuse to raise prices are expected to adjust their positions in the coming days.

Winter Weather Disrupts Scrap Generation and Transportation

Two consecutive winter storms have further complicated the scrap supply situation. The first storm, which struck in early January, caused significant disruptions in traffic and recycling collections, especially from Kansas to Maryland. The second storm, expected to follow a similar west-to-east path, is predicted to impact scrap collection and trucking services across parts of the South, including Arkansas, Tennessee, the Carolinas, and Atlanta. This ongoing disruption to transportation infrastructure, coupled with reduced demolition and construction activity due to colder temperatures and the holiday season, is further tightening scrap supply across the country.

Domestic Steel Demand and Reduced Steel Production Drive Scrap Needs

Domestically, steel mills are seeking to rebuild their scrap inventories following a dip in steel production. Data from the American Iron & Steel Institute (AISI) indicates a 2.5% decline in U.S. steel output in 2024 compared to 2023, which has contributed to heightened demand for scrap. Despite this reduction in production, domestic steel mills are looking to secure more scrap material to stabilize their operations, pushing up demand and creating upward pressure on prices.

Limited Overseas Demand Fails to Offset Domestic Trends

On the export side, the overseas scrap market is not contributing to price increases. Davis Index reports that bulk shipments of heavy melting steel (HMS) from U.S. ports in New York and Los Angeles are being traded at lower prices compared to December. In January, HMS was priced at $315 per ton in New York and $306 per ton in Los Angeles, reflecting a downward trend in overseas scrap pricing. Even with potential disruptions at U.S. ports due to labor disputes, the international market is not expected to exert significant upward pressure on domestic scrap prices.

Conclusion

The U.S. ferrous scrap market is poised for price increases in January 2025, driven primarily by tight supply, winter weather disruptions, and increased domestic demand as steel mills seek to replenish their inventories. While the overseas market remains weak, the combination of these factors is expected to push prices up by as much as $20 per ton in some regions. However, scrap collectors may withhold material in anticipation of even higher bids, further tightening the market.