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Ferrous scrap market bracing for sharp drop

Keywords: Tags  ferrous scrap, scrap prices, shredded scrap, obsolete grades, prime scrap, Sean Davidson, Lisa Gordon

NEW YORK — Domestic ferrous scrap prices appear likely to settle weaker than originally anticipated in October as some early trades and a deafening silence from consumers point toward significant price erosion, according to several market participants.

In the bellwether market of Chicago, sources said at least one consumer completed some early transactions at prices that were down $45 to $50 per gross ton on both prime and obsolete grades.

Most sources had previously forecast the market would drop between $30 and $50 per ton, but on Thursday several sources said it now appears the price drop for October will be a minimum of $40 to $50 per ton.

Poor demand from the few mills that are out in the market with early offers and the absence of any real activity from the majority of the other mills has led to the heightened market bearishness, sources said.

"It sounds like most mills are waiting to see what their needs really are, (especially as) orders for finished goods slacken more each day," according to one source, who completed a few sales into the Chicago region at prices that were down $50 for shredded scrap, turnings and prime grades and $40 lower for obsolete grades.

Outside of Chicago in the larger Midwest region, sources reported early sales of prime grades, including No. 1 busheling, at prices that were down anywhere from $50 to $60 per ton from the previous month’s transactions.

At least two sources said there were rumors that prime grades in certain areas of the Midwest could drop as much as $70 per ton, although no trades were concluded anywhere near that level.

"Early prime sales for limited volumes were down $55 to $60, but we’re finding it harder to get volumes placed. It could drop to down $70 on primes in some pockets," one Midwest source said.

Players in St. Louis are also expecting a drop when October pricing shakes out. "Sounds to me like pricing will drop about $50 on most grades, give or take $5 either way, depending on grade and destination," a source in St. Louis said. "I am not sure how willingly sellers will offer tons they may not be confident in seeing come across their scales."

In Detroit, sources speculated the weakening would be in the range of $40 to $60. In other regions like the Mid-Atlantic, the domestic scrap market remained largely quiet as mill buyers were absent from the market and scrap sellers braced for low offers or no offers at all.

"It is going to be one of those ugly months when you wish you were in a different industry," a western Pennsylvania scrap processor said.

In the Pittsburgh, Cleveland and Youngstown, Ohio, markets, no October deals were reported as of midday Thursday. Three mills in these cities have scheduled downtime and a fourth mill in Pittsburgh officially announced it wasn’t buying a pound of scrap this month, AMM was told.

Two Ohio mill buyers said they won’t enter the market until Friday or Monday, while two other mills in Ohio have reduced their buying plans.

In the Southwest, a similar scenario of mill outages and low demand is under way.

Meanwhile, in the Birmingham, Ala., market, a few small transactions of prime scrap occurred Monday at levels that were down $55 per ton, and now prices are being offered at down $70 per ton, one broker said. Participants in Birmingham said they are largely predicting that the cuts will be down an average of $55 per ton, prime will be down $70 per ton and shredded will be down $50 per ton when the deal making draws to a close.

Lisa Gordon, Pittsburgh, contributed to this story.

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