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Midwest scrap falls short of expected gain

Apr 03, 2014 | 07:19 PM |

Tags  scrap, ferrous, steel, Midwest, Detroit, Chicago, Indiana, St. Louis Sean Davidson

NEW YORK — Midwest ferrous scrap prices are unlikely to increase this month by a previously speculated range of up to $30 per gross ton after early trading in some regions indicated big numbers had found little support.

Steel producers in the Detroit area, typically the first to trade every month, stepped into the market April 3 with bids on all scrap grades up $10 per ton from March prices.

Market participants said they expect buyers and suppliers in Detroit to complete trading by late April 3, or April 4 at the latest, at which point final prices and trends will become clear in a market that could either weaken or strengthen based on how much supply buyers are able to secure.

Detroit sources were divided on whether or not buyers will face resistance on at least some grades, but several mill buyers said they had seen no push back yet.

Sources said gains of $20 to $25 per ton received little support in Detroit despite scrap trading at those increases in the Ohio Valley as outages announced at some steel plants in the overall Midwest region took the wind out of demand-side support.

"Dealers will ship a bunch but I do not believe they will sell down to the basement. The market did not move as expected, so it’s possible that May could show a little more strength if all the consumers came back in. It’s a big maybe, but then who can predict anything," one dealer said.

A second Detroit-area dealer called it an odd market and said that an outage at U.S. Steel’s Corp.’s Great Lakes Works in Ecorse, Mich. (, March 28), meant scrap suppliers had to fight with other mills for meaningful increases that did not materialize.

In Chicago and Indiana, sources reported early transactions in a range of up $10 to $20 per ton and said that, as in Detroit, final prices and trends will only become clear on April 4, when the Midwest and most other U.S. markets are expected to complete trading.

A few sources said that several Midwest mills had once again secured large volumes of scrap on a price to-be-determined (tbd) basis, which at least one dealer called a "mistake."

"I think the only reason the market has backed off is due to Chicago activity," he said. "So many tons were committed against ‘tbd’ pricing that it took away any leverage to push pricing. It’s a big mistake by dealers. Tons are sitting in mills’ pockets with no price attached. It gives all the advantage to the buyers. I think it has created a false sense of security.

"On top of that, several now think that maybe things are getting soft as we head toward May," the dealer added. "I think it’s laughable for consumers to think that dealers will buy scrap this month at current price levels and sell it to them next month at down pricing. I guess we’ll see."

In Iowa, one steel producer reportedly bid for scrap at prices unchanged from March, citing low demand. Suppliers said the mill told buyers that it had a healthy inventory in addition to scrap still owed from March.

In St. Louis and markets further south, sources reported early trading at increases of $15 per ton on some grades, with many speculating that final prices could trend anywhere from sideways to up $20 as an uncertain market continues to seek direction.

"During March, many mills sought scrap mid-month and did make deals at very high prices. Whether that affects their overall appetite now is debatable," a broker said.

Most sources said scrap flow into dealer yards is picking up and will continue to get better into spring.

With most sources saying the market had lost steam and sentiment had cooled from mid-March, one broker is still optimistic. "We also have a rising export market to Turkey and another steel increase on the horizon," he said. "Yes, there will be better domestic scrap flow in April, but the news is not all bearish."

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