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February scrap prices look set to take a worse than expected tumble when final settled prices come out on Monday, as preliminary data on the American Metal Market (AMM) website indicates that shredded scrap (obsolete) and #1 busheling (prime) scrap will decline some $30 and $45/ton (or 6.4% and 8.7%) to $440/ton and $475/ton, giving back a large chunk of the $60/ton and $70/ton gains seen the over last two months.

The $30/ton likely drop in shredded most probably is due to reduced overseas demand from Turkey who was largely out of the market in the month – or purchasing from Europe – and several Asian countries who were celebrating the Lunar New Year holidays.  We suspect the much-larger-than-expected $45/ton drop in prime scrap grades is likely the result of at least one major domestic steelmaker making opportunistic foreign buys for February arrival as well as reduced pig iron prices and  stronger than expected factory activity (which creates prime scrap).

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