Steel Shares Touch Two-Month High as Scrap Prices Seen Bottoming

  • Steel Dynamics says worst of scrap declines may have passed
  • Bloomberg Americas steel index climbs for fifth session

Gains in U.S. Steel Corp. and Steel Dynamics Inc. helped push a producer-shares index to a two-month high amid speculation that declines in scrap prices are subsiding.

The Bloomberg Americas Iron/Steel Index climbed as much as 1.8 percent to the highest since Aug. 16. The gauge is headed for a fifth straight increase, the longest rally in three weeks.

Managers at Fort Wayne, Indiana-based Steel Dynamics said on a conference call with analysts on Thursday they’re seeing signs that prices have reached a bottom. A Steel Index Ltd. gauge of scrap prices in the U.S. has dropped about 20 percent since June amid falling mill-use rates and a stronger dollar.

“People tend to trade these stocks based on steel prices and scrap prices,” Philip Gibbs, an analyst at KeyBanc Capital Markets Inc. in Cleveland, said in a telephone interview. “The perception right now is that the turn cart on steel pricing and scrap is going to be to the upside toward year-end.”

U.S. domestic hot-rolled coil, a benchmark price, dropped to $482 a short ton this week, the lowest in six months, according to The Steel Index. Charlotte, North Carolina-based Nucor Corp. reported third-quarter earnings that missed analysts’ estimates amid weak demand in the energy and heavy-equipment industries.

“We have seen some activity in the export market starting to pick up a little bit, which further tells me we reached a bottom point, inflection point on the scrap,” Russ Rinn, an executive vice president at Steel Dynamics, said on the conference call. “So, we believe we’re at the bottom on the scrap side, not necessarily anticipating a significant move in the upper section; but, again, we also don’t see there’s much downside push either.”

Shares of Steel Dynamics rose 4.8 percent at 1:28 p.m. in New York, while Pittsburgh-based U.S. Steel gained 5.5 percent. Nucor, the biggest steel producer in the U.S., advanced 0.6 percent after falling as much as 5.7 percent earlier.

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