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Tight supply expected to drive up scrap prices

Keywords: Tags  ferrous scrap, scrap prices, plate and structural scrap, No. 2 heavy melting scrap, steel, mills, Lisa Gordon

PITTSBURGH — Steel mill buyers and ferrous scrap suppliers expect March pricing to be a repeat of January.

"This market is supply-driven. There is no inbound flow, and buy prices are already rising. I expect at least January levels, possibly more, in March," said an executive for a large chain of scrapyards serving Ohio and Pennsylvania.

The scrap market pulled back in February as mills were able to secure their melting needs at discounts to January’s prices, but those deals are no longer available.

"Some mills came back and paid January prices for plate and structural scrap. It’s pretty clear that with good demand in the east and insufficient buying in February, we’ll see January prices or very close around here, and maybe a little higher for the cut grades," an East Coast player said.

An Ohio mill buyer agreed. "We are anticipating a rebound in scrap prices for March to where the market was in January, and possibly higher on some grades," he said.

"Several mills we sell to came back for more, signaling that they either were caught short or wanted to take advantage of the bottom of the market," an Ohio broker said. "When dealers heard that, they pulled back. We believe this response will push the market to recover all $10 to $20 (per gross ton) that consumers took out of the market."

One East Coast supplier said a mill tried unsuccessfully to buy more prime material at February numbers. "Mills may have to give back some of what they took in February to secure March tons," he said.

A Mississippi River market player said the absence of a January bump in prices leaves little wiggle room for scrapyards. "There was not an increase in the price of scrap during December and January. Normally if you see a cumulative $60(-per-ton) rise in the middle of winter, the price gives all of that back in the spring," he said. "There’s nothing to give back this year, so it’s likely we will see very small movements in the market for months to come."

In Houston, one scrap supplier said that prices look poised for improvement, and shredders have raised their scale prices by $10 per ton to improve the flow. One mill was said to be having trouble obtaining a steady flow of scrap.

Supply concerns seem to be driving the momentum. In February, many mills reduced buys but were unable to cause a pricing implosion, and prices eased down between $8 and $20 per ton, depending on city and material grade.

"Some mills did not get all the scrap they needed and will look to March to make up that difference," the Ohio broker said.

"I think some mills came up short on their buy," said a broker who sells into the Midwest. "With February being a short month and inventory reductions at mills and dealer yards, the March market is poised for an increase."

Sources at scrapyards in all regions said they were having a difficult time replacing the tons sold in February. The Mississippi River source noted that No. 2 heavy melting scrap is selling for $55 per ton lower than it was at this time last year.

"I believe demand in March will be steady and supply-driven," said the broker selling into the Midwest. "Our inventories are low, especially on obsolete grades. Most dealers are in the same boat, and this will help fuel the market."

Finished steel buyers pay attention to scrap for pricing signals, but one major broker said that he is paying attention to finished steel prices for indicators. If service centers are successful in buying finished steel at discounts, mills could try to use weak selling prices as a negotiating tool.

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