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Beam buyers wary as scrap mart loses steam

Keywords: Tags  steel, wide-flange beams, structural steel, steel prices, Schnitzer Steel Industries, scrap, scrap prices, Frank Haflich

LOS ANGELES — Signs that scrap prices are losing steam, combined with a continued lag in structural steel demand, have some steel buyers altering their outlook for wide-flange beams.

"A month ago, everyone was expecting things to improve pricewise," a southeastern distributor said. "Now, that isn’t necessarily the case."

Major structural producers—following a $52-per-ton boost early this month in AMM’s consumer buying price for shredded automotive scrap in the Chicago market, the basis for many mills’ surcharges—have raised their published transaction prices on wide-flange beams by $35 per ton to $780 per ton ($39 per hundredweight) f.o.b. mill on most core sizes (, Nov. 19).

The new price was due to become effective with shipments ranging from Nov. 12 to Dec. 1, depending on the producer, and under normal demand conditions would already be in effect. But buyers have, nevertheless, continued to order material off mill floor stocks at pre-price-increase levels.

"We put some orders in this week for November shipment," one service center buyer said.

While expectations among buyers until recently were for scrap tags to continue rising over the next few months, that outlook appears to be changing with indications that the scrap market is losing steam. Portland, Ore.-based recycler Schnitzer Steel Industries Inc. said Tuesday that its average net selling prices for ferrous scrap in its fiscal first quarter ending Nov. 30 are expected to decline some 5 percent from the previous quarter, while ferrous sales volumes are expected to be off about 20 percent (, Nov. 27).

This has altered expectations of some steel buyers, who had been anticipating firming prices over the next few months but now see the possibility that scrap might instead go sideways, if not actually head down again.

"I’m not looking for the same run-up in scrap prices that we’ve seen in the last few years," one Midwest distributor said, noting that what has become an annual New Year’s price rally for his own steel products might not continue as far into 2013 as it has in past years.

Most long product buyers noted that a fall of $20 per ton or less in scrap tags probably wouldn’t trigger mill price cuts, in the interest of maintaining market stability. However, a substantially larger fall in scrap could force producers to adjust their prices, most observers agreed.

Moreover, the distributor market remains under pressure, especially in the West. Recent arrivals on the West Coast of South Korean beams bought by at least one major distribution chain at some $37 to $38 per cwt ($740 to $760 per ton) ex-dock—compared with a laid-in domestic December price into this market at $44 to $45 per cwt ($880 to $900 per ton)—could put added stress on resale prices, market sources said.

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