resistance in the Midwest to sharp downward movements on
ferrous scrap pricing for February has prolonged trading in the
region as buyers and sellers continue to negotiate a middle
The early entry of a Chicago
mill at down $10 per gross ton on all grades compared with
January prices initially brought hope to some suppliers who had
anticipated a weaker market of as much as down $20 per ton or
more this month. But other sources said the mill had bid at
stronger-than-expected numbers late in the day Feb. 4 to cover
a short position on certain grades of obsolete scrap, including
plate and structural and heavy melting scrap, and did not
appear to be indicative of the regions overall trend.
"Down $10 is the best price
yet," said one seller in Chicago, who noted that mills were
"slow coming out" but appeared to be finishing up their
February buys by the end of the day Feb. 5.
A second source agreed that the
Chicago mills unexpected $10-per-ton drop was not
characteristic of the overall market, noting that "they were a
bit cheaper than a lot of the market last month and they need
those grades. Heavy melt is tight for sure."
A third source noted that the
mill initially bid down $15 to $20 but scaled it back after
receiving "a lot of pushback" from suppliers.
In Detroit, the February market
appears to be shaping up closer to projections, with market
participants reporting most mills coming out with bids down $20
on all grades, although few dealers confirmed selling any tons
at that level so far.
However, a buyer at one Detroit
mill said he was confident he would still secure his tons at
the prices he was looking for. "I think enough scrap is
available in the area. Theres a reduced buy due to
February being a shorter month and we have a decent inventory
level," he said.
In St. Louis, at least two mills
reportedly were in the market as of Feb. 5 with bids at down
$15 per gross, although sources reported few confirmed
A Midwest broker agreed that the
market was "very much underdeveloped" by Feb. 5, despite
earlier expectations that most major markets could settle by
the beginning of the week.
"Many mills in the geographies
you mention have not settled but want ... others to believe
they are having sweeping success buying at down $20. Yes, Ohio
is about 50 percent traded but its far from over. A lot
of dealers are not convinced the market is down the full $20,"
he said. "I think we have a protracted battle on our hands
before we are completely settled."
If Midwest mills succeed in
achieving the full $20-per-ton drop many appear to be
targeting, they could feel the effects of their aggressive
purchasing strategies next month, one Midwest shredder source
said. "I was really surprised at the down market with all the
snow and cold weather. I have a feeling this could all come
back to bite them in a month or so."
Outside of the Midwest, early
trading activity also suggested a softer pricing environment in
Weaker order books and limited
buying needs worked in the favor of Cleveland mills, sources
said, with two steelmakers entering the market at down $20 per
ton across the board for all grades. Sellers into Cleveland
were willing to sell lower because they recognized that mills
had cut their buying programs, sources said. One mill cut its
program in half while another reduced its buy by 20,000 tons,
Some sources predict Pittsburgh
will emulate Cleveland when it settles for February, while
others believe prices there may not be down the full $20 per
ton. "Western Pennsylvania and Ohio is the weakest part of the
country right now," one scrap source said.
Meanwhile, expectations that the
southeastern scrap market would settle by Feb. 5 dissipated as
the market started to show some signs of strengthening due to
In early sales into Birmingham
last week, a mill buyer was able to secure prime and obsolete
grades at down $20 per ton. The southeastern mills are not
especially hungry this month, with one mill not accepting scrap
until next week, another mill in the midst of an outage and a
chain of steel mills reducing its overall intake by 40,000 tons
for February, AMM understands.
"The mills just dont need
that much scrap. I bet the melt rate down here is under 70
percent," said a supplier of prime scrap to the area.
Nonetheless, last weeks
discounted buys of down $20 appeared to dry up at the start of
this week as scrap sellers in the region began to put up
resistance, sources said.
In Texas, sources said mills
were yet to bid on scrap for February, with speculation varying
from a sideways to a down $20 market.
"There may be ample scrap back
east, but through Oklahoma and north Texas the yards are bare,"
one Texan supplier said.
In Philadelphia, market
participants said one mill was trading at down $5 on heavy melt
and plate and structural scrap and down $15 on No. 1 busheling
and shred. A second mill reportedly is in the market with a
limited buy at down $10 to $15, while a third mill has so far
traded only shred.
Sources said they expect the
market in Philadelphia to settle Feb. 6, with most sources
expecting mills to succeed at completing their buys at their
original bid levels.
"I think they will get covered
since everyone is quoting the same price. Even though scrap
flow is dismal, the dealers will sell enough to generate some
cash flow and that should take care of the mills since their
order books are just so-so," said one Mid-Atlantic source.
Lisa Gordon, Pittsburgh,
contributed to this story.