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Ferrous scrap market slips sideways into '13

Keywords: Tags  ferrous scrap, scrap metal, prices, regional markets, Midwest, mill buyers scrap sellers, brokers, Cleveland Youngstown

PITTSBURGH — Ferrous scrap buying in the Midwest began in earnest Friday as several steel mills in the region entered the market at prices mostly sideways from December.

Market participants said mill buyers in Chicago, northwest Indiana and those buying from the St. Louis region started negotiations early Friday. A number of mills reportedly have secured significant tonnages of obsolete and prime scrap at sideways prices from the previous month. The markets, however, are expected to settle Monday, as prices were yet to be finalized on several trades Friday afternoon.

In the Mid-Atlantic, mills in the Philadelphia region concluded a majority of their purchases Friday, sending obsolete prices $10 per gross ton higher for January over a month ago. Sources said an improvement in export market sentiment fueled the increase, surprisingly making Philadelphia the first city to settle this month.

Scrap markets in the Ohio Valley, Pennsylvania, the Southeast and parts of Canada have yet to establish a direction for January prices, though a downward spiral appeared unlikely.

Initial expectations for higher prices that rang in the new year have evaporated, with mills trying to enter the market at sideways pricing. Mill buyers and suppliers have managed to successfully create an atmosphere of no urgency to ship or receive raw materials.

"Yes, it is January, which is always an up month. Iron ore prices are at a five-month high, and export is up, so scrap should be up, but it is not. These are all factors that play into prices, but at the end of the day, they are just that—only factors," said a Canadian broker.

There are a plethora of reasons for the ambivalent pricing arena, said one broker who represents a steelmaker. Sellers’ willingness to ship on a to-be-determined basis has contributed to the silence and has dealers conceding sideways, he said.

"Mills are having trouble gauging what they need. Plus, there was a lot more volume traded in December than people realized," the broker said.

"We are dragging our feet because if the market is sideways today, we can always sell sideways tomorrow or the next day," said one supplier into the Birmingham, Ala., market.

One Birmingham mill has managed to pick up a third of its needs at a sideways price, and two others are trying to make a similar move. Order books at another Birmingham mill are short, and there is no expectation that sales will show a marked pickup over the next 30 days.

One scrap broker sold sideways into half a dozen Birmingham mills Friday afternoon.

Another seller into Birmingham blames the erosion of earlier expectations for higher prices on lawmakers in Washington. "The fiscal cliff wore everybody out," the seller said. "People don’t feel like spending money."

While early sales in Birmingham were sideways, players in the Carolinas and Atlanta markets are still holding out hope prices will be up in January.

Meanwhile, in Pittsburgh, one seller agreed to ship material on a to-be-determined basis to a local mill, while another has sidelined himself for the moment.

"The mills are trying to go sideways. The only question is, Will they get what they want? Because locally, we don’t see a big inventory overhanging the market," the second Pittsburgh seller said. "We may not know the answer until February, when we find out if the scrap actually ships."

In Cleveland and Youngstown, Ohio, mills have either not yet entered the market or are accepting some tons on a to-be-determined basis.

On the Canadian front, Ontario is quiet, with local mills not planning to enter the market until next week. "The order book for at least one producer stinks right now, so there is no need to rush for scrap," said a Canadian scrap executive.

Sean Davidson, New York, contributed to this article.

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