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February scrap prices appear poised for fall

Keywords: Tags  scrap prices, Chicago, mill buyer, metal recycler, shredded scrap, prime scrap, heavy melting scrap, Lisa Gordon

PITTSBURGH — An ample supply of raw material, mediocre mill demand and bearish mill buyers could lead to a drop in scrap prices for February, according to scrap brokers, processors and mill buyers.

Brokers at mill-owned scrap assets are sending mixed signals to their customers. “We’ve received some January order cancellations and some have been left open. Yards don’t have large inventories and mill demand remains constant,” a seller into the Midwest said.

In Chicago, numerous integrated and electric-arc furnace (EF) mills have executed their right to “end-of-month cancellation rights”—a clear sign the market will retreat, sources said.

“We saw cancellations from mills across the board, which is pointing the market (downward), but it does appear to be a soft sideways,” said a Chicago broker. “The talk is the mills will come out and try for down $20 (per gross ton) but will settle at better prices if there is resistance and enough of us choose to hold our tons.”

“I was wondering if snow would impact (the) market, but it doesn’t look this way,” a Chicago scrap processor said. “The market looks poised to go down $10 to $15 (per ton), and if mills try to pull it down too much to $20, there will be resistance from sellers.” The processor noted that cut grades are in tighter supply than prime scrap and shredded scrap.

The Chicago broker said his firm will minimize its sales of cut grades this month because it doesn’t believe it can cover a huge order. “The tightness in cut grades could work to artificially help some of the other prices,” the broker said.

“I see the market down $20 to $30 (per gross ton) this month. There is very little demand and a more-than-adequate supply of scrap,” according to an Ohio mill buyer.

Expectations in the Ohio Valley have been dampened as Canadian scrap becomes available to the region, a recycler supplying Ohio mills said.

The same scenario seems to be establishing itself in Detroit, where the market is expected to settle Tuesday, with expectations that the price will be down $20 a gross ton. One Detroit mill exercised its end-of-month cancellation rights but will be in the market hoping to buy at lower numbers, according to one of its suppliers.

Early shredded scrap sales into the Philadelphia market were down $15 and $18 a ton, but this area is expected to not drop as much as other cities due to an active export market.

One mill entered the Philadelphia market on Tuesday afternoon and secured heavy melting scrap down $10 a ton, shredded scrap down $12 a ton and No. 1 busheling scrap at an $8 discount to January deals.

“If mills come in and buy at down $10, I think they will get what they need, and our buyers think they may be able to take the shred feed prices down to match,” said a supplier into the Philadelphia market. “At down $20 (per ton), we will not be able to replace tons sold, so we may sell some at down $20 but will not sell everything.”

Prime scrap in the neighboring Cincinnati market was down $15 a ton Monday when compared to January.

In Birmingham, Ala., early sales of shred and prime were down $20 a ton, with one mill offering to buy at down $30.

In Houston, players are divided, with some calling the market down $10 per ton and others believing it will fall more.

“Shredders in Houston are paying down $20 (per ton) on shredder feed. Last week, the mill was talking sideways to down $10, but now I suspect they will try and take it down $20,” said a supplier into the Southwest.

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