NEW YORK Domestic ferrous scrap prices look set to record larger-than-anticipated increases in the Midwest this month after steel mills in Detroit settled $55 per gross ton higher late Monday.
Previous indications that Detroit could settle $40 per ton above October prices went by the wayside late Monday after suppliers held their own against mills who felt that the market warranted a smaller increase, AMM understands.
By Monday afternoon, all but one consumer in the Detroit area gave in to supply-side fundamentals to settle at a $55-per-ton increase for November across all grades. "The $55 increase was kind of a compromise number. Suppliers wanted up $60, consumers were holding out for up $50 and then everyone finally settled at up $55," said one source in Detroit.
A second source, however, said that the final increase was not reflective of actual steel industry performance. "The market should have been up $20 to $30 for November. It went up $55 because dealers scared consumers about supply in December and maybe some mills are short of scrap," he said.
Although Detroit was the only city to see November prices settle Monday, some early trading reported out of other Midwest markets like Chicago and St. Louis indicated that prices may settle up anywhere between $40 and $55 per ton in those areas, depending on the grade.
"Pricing seems to be driven by the supply side, as Im not sure that demand is dramatically different than last month, although some consumers evidently ended up short last month," a third source said.
A fourth source said the majority of this months pricing increase was largely a result of the significant decrease recorded last month. "I dont think theres any doubt that certain key indicators driving pricingsuch as export activity, steel sales and seasonal factorsplayed a role in determining that steel scrap pricing needed to increase. That said, the quantum that were facing is nothing more than a correction, and not based on sound fundamentals such as a true systemic shortfall of available scrap," he said.
The $55-per-ton increase in Detroit nearly returns prices to September levels, as most grades dropped between $60 and $65 to start October.
Early indications in other markets also suggest a possible return to near, or even on par with, September pricing levels.
"(It) sounds like Ohio Valley and the South are a little stronger than the Midwest from what Im hearing," a fifth source said.
Prices in the Ohio Valley and Southeast have yet to settle, although markets did see early activity Monday.
In Cleveland, one mill is paying up $65 per ton over October levels for No. 1 busheling, while a second mill is paying up $60. The second Cleveland mill entered the market at up $60 per ton for shred but secured its other needsincluding No. 1 heavy meltat up $55.
"The mills beat down the market too much and it is now biting them," a Cleveland-based broker said of the apparent increase.
In Cincinnati, prices were shaping up to be just $10 shy of September levels, with two mills paying up $45 per ton to secure their melting needs.
Birmingham, Ala., was still waiting for one producers brokerage firm to enter the market early Monday afternoon, although a second producer who doesnt operate in the Southeast had its brokers actively seeking scrap, sources said.
"This producer came into the South looking for scrap and we havent seen that in six months, which leads me to believe that they sense the shortage is much longer term," a scrapyard executive said.
A second regional source said the producer was looking to springboard scrap out of the Southeast because it is short material. "They are paying aggressive numbers and are offering up $60 and are seeking a 60-day supply," a broker said. Some mills also are expected to buy heavy in November knowing that December is a short shipping month for scrap dealers.
According to a second scrapyard source, all the Birmingham mills are in need of scrap this month, indicating that prices in the area could log a significant bounce.
"The mills totally destroyed the collection system on obsolete scrap by taking the market down. They were playing with fire and have now lit themselves up," a local shredder source said.
Lisa Gordon, Pittsburgh, contributed to this story.