MONTERREY, Mexico Early speculation about domestic ferrous scrap pricing points to a sideways-to-marginally-down market in February as participants wait for better cues on mill demand and scrap flows.
More than half of the respondents to an AMM survey of buyers, dealers and brokers said they expect a sideways-to-down-$10-per-gross-ton movement across various regions, while another 25 percent said the market could decline between $10 and $20 per ton.
Only a handful of sources said the market would show a strong sideways-to-up-$10 trend.
Sources said that price movements likely would be region-specific, with some areas such as the Ohio Valley expected to show a tad more weakness than others.
"Supply is good on prime (grades) and shred. I expect Cleveland pricing to be down $10 to $15 (per ton), with Chicago probably similar," a buyer for one steel producer said.
A buyer for a second steel producer offered an early read that fell outside of the general speculation. "Our feeling so far is down $20 (per ton) on primes and a bit more on shred," he said. "Demand for finished product is soft, and our order book was revised down twice in the past 10 days. It would be great if the (steel) price increases stick, but given that (one major steel producer) has not announced, and also, based on what we are hearing from our salespeople, customers arent believing it."
However, a buyer for a third producer said that current signs indicate a sideways-to-up trend in February. "Overall, supply meets demand," he said. "Primes are in oversupply to obsolete. Utilization is sideways. Short lead times are a sign of cautious demand. Nonexistent exports on the Gulf and East coasts could pressure scrap prices, but hot-rolled coil price increase announcements and lower scrap collection due to cold weather in the Midwest support prices."
"Things are looking somewhat softer, but thus far not significantly," a fourth market source said. "Demand seems mixed, with flat-rolled still good but long products less so." Two Ohio Valley mills are making smaller buys, and a third Ohio Valley mill has some increment of home and buyback coming at it that will lessen its participation, he said. "This may result in mid-Ohio being a little weaker than other nearby markets."
Chilly weather slowed inbound scrap flow to yards by about 20 percent last week, the fourth market source said, but scrap is just pent-up and will break loose on the first 40-degree day.
In the Midwest, several sources reported weak scrap flows due to cold weather, which led at least one seller to speculate on a stronger February market.
"We have seen colder weather kick in that caused a drop-off in already-meager scrap receipts. Now, the sheet producers have seen a pickup in the order book and increased coil prices by $50 per net ton," he said. "With demand picking up a bit and less total scrap available, this Midwest market should be susceptible to a price increase. I would not be surprised if some scrap is already being traded in quiet deals at higher prices."
Most other Midwest sources, however, said that current talk has the market pegged at anywhere between sideways to down $20.
"Demand is mixed; some mills need scrap and others do not. SBQ (special bar quality) bar mills are down and will not need as much scrap, (and the) same is true on structural and rebar," one broker said. "Sheet mills are the only shining spot, with auto doing well."
One large player in the Chicago area said weak scrap flows in the central Midwest have accompanied slow demand from mills. "Without the pressure from the East, I think this market would be sideways," he said. "The South is tighter but will benefit from warmer weather sooner."
One consumer in the Mid-Atlantic region said the market appears to be down $10 to $15 per ton and heading lower. "Current inventory position is exactly where we planned to be in early January, based on beginning inventory, consumption and receipts," he said. "At this point, (it) appears that sufficient inventories should be available to satisfy requirements at projected downward pricing."
Some suppliers in the region said a recent decline in export prices would support that theory, but one seller offered a different view. "Supply of obsolete grades is OK, but demand from mills and exporters also remains strong," he said. "I expect the market here to be sideways at least and maybe up a little. The Ohio Valley and Midwest do not appear to be as strong, with less finished steel demand and OK scrap flows."
In Texas, one source said that he expects mill prices to be sideways to slightly up. "We have made a recent push to bring (scrap) inventory levels up and are currently paying a hefty price for peddler materials coming in," he said. "We have noticed a slight pullback in flow from our industrial customers."
Most shredders expect the market to go sideways to perhaps down $10 for those "that did not get a drop in January," a second Texas source, noting that "some sold late and had to take a cut of $10. All hope that demand picks up next week and it is up $10 to $20, but it does not look good."
In the Southwest, a market participant said there is still price competition with exports and Mexico.