PITTSBURGH An unusual
turn in the domestic ferrous scrap market in January might have
contributed to a dampening in recent settlement prices for the
first U.S. ferrous scrap futures contract.
CME Groups U.S. Midwest
No. 1 busheling ferrous scrap futures contract for February had
more than three dozen lots settle on Jan. 10 at $390 per gross
ton, a $20 decline from previous expectations. The contract
will be settled based on AMMs Midwest Ferrous
Scrap Index for No. 1 busheling in February.
"People were confused that
Januarys scrap market wasnt higher than December,
and the lower price is a reaction to that," said one player in
the derivatives market.
While the industry was
anticipating higher scrap prices in January, prime scrap in the
Midwest failed to follow its usual course and instead settled
flat for the month (
amm.com, Jan. 10).
While 37 lots, or 740 tons,
settled at $390 per ton on Jan. 10, there have been 1,140 tons
swapped on the futures exchange so far this month.
Bidders were willing to pay $380
per ton on Friday to take a position in busheling futures for
February settlement, but as of midday no one had agreed to sell
at that price.
The $390-per-ton price is in
line with what is being quoted for CMEs futures offerings
for March, but a busheling broker expects March deals to turn
in a stronger performance.
"March is the biggest
manufacturing month in the U.S. and is when things start
roaring," the broker said. "More steel is sold and more scrap
is generated during that month, so if March is down we are
headed into a deep recession."
Looking nearer term, a scrap
exporter believes the worst-case scenario for February is
sideways. "Export numbers are pushing up and the export market
will consume a lot of scrap in the next few weeks," he
The scrap futures volume is
still trading thinly but is performing well for a new contract,
the derivatives market player said.
Some 1,320 tons were traded in
September, 4,440 tons in October, 3,500 tons in November and
900 tons last month. December is historically a slow month in
the futures markets, according to a source in the hedging