Ferrous scrap supply in southern California will increase following the shutdown of Commercial Metals' (CMC) Rancho Cucamonga melt shop earlier in October, potentially countering recent upticks in local prices.
The rebar mill consumed an estimated 25,000-30,000 t/month of ferrous scrap, according to local suppliers. Scrap dealers surveyed by Argus expect this material to shift toward the Los Angeles bulk and container export markets, as demand and logistics for rail transport inhibit profitably, redirecting scrap to the closest domestic mills in Utah, Arizona and Oregon.
Ferrous exports from the port of Los Angeles averaged 247,000 t/month through the first eight months of 2019, and accounted for half of all US west coast ferrous exports in August, according to US Commerce data.
The melt shop closure comes at a time when Los Angeles bulk and container export prices have stabilized following months of downward movement.
The weekly Argus assessment for containerized HMS 1/2 80:20 ferrous scrap rebounded to $215/t fas Los Angeles on 18 October after falling by $55/t to $210/t since 2 August.
Taiwan import prices, the largest market for Los Angeles container exports, also rallied in this period after declining by $61.50/t to $222/t on 7 October. Since then, the Argus daily assessment for HMS 1/2 80:20 cfr Taiwan has increased by $14.50/t to $236.50/t on 24 October.
Dealers responded with mixed sentiment regarding how the loss of CMC consumption will affect the market going forward.
"That material that would have gone to CMC will have a dampening effect on the market overall, but it won't be earthshattering," one southern California exporter said.
Still, dealers without container-loading capabilities could feel a greater impact from the altered market dynamics.
"One dealer that sold 100 percent to CMC did business with us last week, and he had never done container freight before," a Los Angeles-based trader said.
"It won't be that terrible for businesses exporting on their own, but if you don't have a container loader, you're out of luck," said one dealer, noting that the excess scrap will likely flow to big players in the Los Angeles ferrous market, including bulk exporter SA Recycling and Ecology Auto Parts.
Those companies operate the only shredders in southern California, with SA's three in Terminal Island, Anaheim and Bakersfield, while Ecology has a shredder in Colton about 15 miles from the Rancho Cucamonga mill.
The additional supply stands to further benefit southern California's lone bulk exporter SA Recycling, which has enjoyed lower buying prices relative to other west coast bulk export locations.
Los Angeles bulk export yard prices assessed by Argus have also faced pressure in recent months, partially weighed on by weak demand for scrap and finished steel in Asian markets. Cut grades fell by $45/gt from August to October, dropping #1 HMS to $150/gt and P&S 5ft to $160/gt. Shredder feed also slid by $30/gt to $75/gt during that same period.
During that same period, San Francisco bulk yard buying prices for #1 HMS fell as low as $167.50/gt and shredder feed slipped to $87.50/gt.
