PITTSBURGH Finished steel
production outages are wreaking havoc on the domestic ferrous
scrap market, with scaled-back melt schedules reducing
mills scrap needs by at least 25 percent, market sources
Scrapyards with industrial
accounts have reported an apparent slowdown in manufacturing,
evidenced by the fact that prompt scrap flows into yards have
"Our largest industrial account,
an auto stamper, is now sending 20 percent less than a couple
of months ago," one southeastern source said.
A Pittsburgh source also noted
reduced tonnage from his industrial accounts.
Mills are throttling back
production in an effort to bring supply and demand into
balance, but their discipline efforts vary: Some are taking a
week or more for maintenance in October, while others are
devoting only one week to rolling or melting four days per
One hot-rolled producer put lead
times at two weeks for hot-rolled coil.
In Pittsburgh, two mills are
buying half of their usual needs.
"The word of the day is
malaise and there is not a lot of urgency to make
deals," one broker working at a mill-owned scrap asset
One mill buyer said he picked up
a nominal amount of scrap early this past week, and by Friday
had moved to the sidelines until the coming week.
And while the outages are more
pronounced this year, there is a definite seasonal trend.
"The majority of it is seasonal
... (but) is it demand? If demand was great, they wouldnt
be doing this," one market source said.
"Normally theres a
November-December slowdown in demand. Manufacturing slows.
Construction slows," one mill source said. "This year there
seems to be a few big (outages), which works out well for the
market. Lead times jump out because of the slow production, so
everyone (buyers) on the fence jumps back in. Everything
seasonal this year appears to be happening a bit earlier than
what weve seen in the past."
"Historically, this is the
slowest time of year. And then you have the ability to ramp up
in the first quarter. I wouldnt be surprised if people
are taking some extra time now, given things are slower than
they were expecting," a second mill source said.
Some Ohio mill buyers also said
they might not enter the market until the coming week.
"There is no business on either
end, and no one seems to care. We are taking our shredder down
for maintenance and arent planning to participate in the
market," one Ohio Valley shredder operator said. "With RG Steel
gone, that means 500,000 tons are out of the market. You would
think that alone would have improved demand."
Mills reduced requirements
were mirrored by scrap sellers. "I sold 65 percent of my normal
buy because I cant replace my inventory at these
numbers," one Birmingham, Ala., player said.
In the Southwest, a source who
deals in scrap and finished steel said he was holding back a
good chunk of his scrap. "We are only selling about half of our
normal sales because we dont have much material in our
yard," he said. "Business is off at least 40 percent on the
(finished) steel side."
A southeastern source noted that
he is refraining from selling after one mill offered to buy
scrap at down $100 per ton. "I dont like it when I feel
like the mill buyer is reaching in my back pocket when he is
talking to me," he said.
In the Midwest, the downtime by
mills has scrap sellers looking outside their normal market.
"Scrapyards out of Chicago are offering tons to this area
because of all of the outages in the Midwest," one broker
selling into Atlanta said.
Chris Prentice, New York,
contributed to this story.