MUMBAI, India Ferrous scrap trade in the Midwest continued to defy historical trends as February prices slipped around 3 percent from January levels to wrap up a winter season that has denied any price gains since November 2012.
Scrap prices typically record some strengthening during the winter months as supply thins, but that hasnt been the case this winter. After trading mostly sideways in December and January, steel mills took advantage of weaker export markets, overall milder winter weather conditions and shorter buying programs to send prices down anywhere between $9 and $15 per ton in February, depending on scrap grades and specific Midwest locations.
In the overall Midwest region, prime scrap tags took the hardest fall as steel mills in northwest Indiana took advantage of weaker markets to their east to secure cheaper supply at as much as $15 per ton below January levels (amm.com, Feb. 7). Mills around Detroit were able to negotiate many tons at down $20, although a late pushback from dealers brought some strength back to the last wave of trading (amm.com, Feb. 6), while mills in St. Louis and Chicago successfully negotiated prime scrap down between $9 and $10 per ton and therefore emerged as the strongest markets in the Midwest.
With all cities in the Midwest region reporting lower prices this month, AMMs Midwest Ferrous Scrap Index for No. 1 busheling settled Feb. 11 at $375.24 per gross ton, down 3.5 percent from $388.97 last month.
"From what I witnessed, the (Midwest) market ... was initially looking like it would be down $20, but quickly firmed up from that," one source said. "I heard that (one broker) was aggressively trying to buy primes from the region and ended up booking substantial tons at down $10, which forced (one mill) to do the same to get their requirements."
Obsolete scrap grades performed relatively better as suppliers continued to cite anemic scrap flows as they sought to prevent a steep fall in prices.
AMMs Midwest Ferrous Scrap Index for shredded scrap settled Feb. 11 at $374.93 per ton, down 3 percent from $386.49 in January, while AMMs Midwest Ferrous Scrap Index for No. 1 heavy melt settled at $347.14 per ton, down 2.8 percent from $357.01 in the same comparison.
The approximately $10- to $14-per-ton drop in AMMs indices marked a departure from a traditionally stronger February, although the declines were less than earlier expectations, a number of market sources said.
Early signs and trading had pointed to a market that would close out February down anywhere between $15 and $20 per ton, sources said, but a strong fight from suppliers worried about flow helped claw back some of the dollars lost in early trading in and around Chicago, Detroit and St. Louis.
"The market turned on a dime on Feb. 6. It tells you how thin the supply chain is. And it tells you something about demand," a second source said.
One mill buyer in Chicago confirmed the development. "The price strengthening is a product of buyers competing against one another for a very finite supply, rather than vendors refusing to sell," he said.