NEW YORK A snowstorm was all the Midwest ferrous scrap market needed to end a trading stalemate as most major markets settled March 7 after an earlier inability to reach a consensus.
A standoff in Chicago and northwest Indiana between mill buyers hoping for increases of $20 per gross ton or less over February levels and suppliers holding out for significantly more began to dissipate March 5 as a snowstorm bore down on the Midwest.
Market participants said the bulk of the trading was done over the next two days, with Chicago settling stronger than St. Louis on a few grades, including No. 1 heavy melt and No. 1 busheling.
In Chicago, price trends differed depending on the buyer and seller, but there was a strong consensus range on price as the market normalized varying price swings seen in February.
No. 1 busheling settled at $423 per gross ton in Chicago, up $43 from February, while No. 1 bundles managed a $38-per-ton increase and settled at $412 for March.
As anticipated, shredded scrap and other obsolete grades did not rise as much as primary scrap prices this month, with Chicago shred settling at $412 per gross ton, up $35 from March, and No. 1 heavy melt settling at $382 per ton for a $33 increase.
"Weather ended the stalemate. It has a psychological impact. Demand was good as well, so it wasnt purely supply-driven," one source said.
However, some of the impact may have been more than sentiment-driven, he said. "Most dealers have had to downward adjust their estimations of scrap collection for March due to the snowstorm. The drop off in collections will be between 20 and 30 percent. The storm hit during this months negotiations, which was the best thing. Even with shred up between $30 and $35, dealers felt (the) market should have been higher. The only mitigating factor was that spring is around the corner."
Only one mill in the region had a smaller buying program for March, with demand from most other consumers higher due to a longer calendar month.
A second source said mill buyers would never have succeeded at keeping increases to just $20 because "mills underestimated how much flow was hit in February when prices were lowered. There was a real shortage of scrap in February. Shredder feed flow was slow. Part of it was price and part of it could be that a lot of scrap was borrowed earlier in the year because of a mild winter."
A third source agreed that flows of obsolete grades were tight but questioned the reasons behind the poor shredder feed flow. "I think a large part of that is the overcapacity of shredders. Flows are down because its being spread out. Most mills reported that shredded offers were sufficient. One mill desperately seeking scrap said it had received enough shred. It is cut grades that are tight," he said.
Markets in Ohio and Pennsylvania also settled March 7 for the most part, with prime grade prices also outpacing obsolete and cut grades in those areas.
In Pittsburgh and Cleveland, the higher value of prime grades restored a sense of normalcy after selling in March at a premium to shredded.
In Pittsburgh, No. 1 busheling increased $40 per ton to $420 and shredded scrap was up $30 per ton to $410, but No. 1 bundles managed only a $25 increase to $400 per ton due to weak interest for large bundles that are better suited for integrated producers due to their size. "Bundles are a real dog here," a Pittsburgh scrap processor said.
In Youngstown, Ohio, prime and shredded scrap returned to status quo to trade on par at $415 per ton; last month, shred sold at a premium to prime material.
In Alabama, Birminghams market settled at up $30 per ton on prime material and up $20 on all other grades. This round of negotiations was especially strenuous, with scrap sellers reporting they were frustrated, angry and not exuberant as they were hoping to get a $40 increase on higher-value material.
"I have already lost a week of shipping and decided to only sell what I need to. This has been especially trying," a Southeast scrapyard executive said.
Some players speculated that Birmingham-area mills have not been able to secure all their needs at up $30 per ton on busheling and will be forced to re-enter the market later this month.
Lisa Gordon, Pittsburgh, contributed to this story.