NEW YORK It has been only
a week since ferrous scrap prices in the benchmark Chicago area
settled for March, but some market participants are already
making forecasts for April: a sideways to slightly down pricing
environment, depending on the region, following this
months double-digit bounce.
Scrap metal deliveries completed
by the last week of March will be the real gauge of next
months scrap prices, several market sources said, with
most dealers agreeing it is still too premature to discuss
Aprils market, let alone dub it weak.
But some market players are
nonetheless eyeing other external factors as they attempt to
forecast the markets next move.
A week after scrap markets
across the United States recorded monthly increases of anywhere
between $15 and $45 per gross ton, depending on location and
grade, a few scrap buyers said they have continued to receive
offers on shredded and prime scrap at prices below March
settlements, leading them to speculate that prices could dip in
Minimal export activity off the
West Coast and a sideways trend on export prices to Turkey this
week lent further support to early speculation that domestic
prices could soften, sources said.
A buyer for one domestic steel
producer said Aprils market in the South for primary
scrap like No. 1 busheling will be further impacted by the
arrival of two bulk vessels from Europe this month.
An informal poll of the market
by AMM showed that the consensus between dealers and
mill buyers leans towards a "sideways" to "down $10 to $20"
market in April in specific regions like the Midwest, a
speculated move that some have dubbed a "correction."
The best indicator of April
prices, however, will be scrap flows at dealer yards and the
tons mills receive from this months trades, buyers and
sellers said, noting they are watching the trends closely.
"February scrap flow sucked. It
is only just now starting to slowly improve. Ive seen a
few yards this week and all had lower-than-normal inventories,"
a mill buyer in the South said. "My concern is that if prices
drop in April, we could see a repeat of Februaryflow
slowing down. Certainly I see no reason for prices to increase,
and would call it a soft sideways at this point."
A scrap buyer for a Midwest mill
said he had since purchased some tons at prices lower that
"what we paid in March," suggesting to him that prices could be
on the decline. "We have also had additional offers over the
last few days that we have turned down. ... (M)argin squeeze
(is) the major issue for mills. Currently, we see the market
down a minimum of $10 to $20 in April," he said.
A buyer for another Midwest mill
projected domestic mill demand will remain steady in April, but
noted that the fundamentals could get out of balance if the
March price increase leads to heavier material flow.
"The question remains if supply
and demand are in balance or out of balance. The uptick in the
market may generate enough flow to push it out of balance if
the import information is accurate and the export market
remains soft," he said.
But the reported prime scrap
imports into the South shouldnt be enough to throw the
balance off, he said. "Given the volume of primes traded, two
vessels wont have a huge impact on the total market. It
should have an impact on the local markets it is brought into,"
"I have seen a steady decline in
total prime scrap being offered to me over the last few months
so it doesnt feel like prime scrap is overhanging the
market like it had been. There was also a slight widening of
the spread between prime and secondary this month, which would
seem to support the fact that the overhang is not as severe as
it was when the compression occurred," he added. "Its a
little early to try to predict April, but given the large jump
we just saw in pricing, I could see it coming back some."
A source at one of the
countrys largest scrap companies said the flow of
material to processor yards continues to improve with higher
offer prices and better weather. "(I) expect supply will be
adequate for domestic demand levels. Domestic demand will be
very regional. ... (E)xpect the Chicago market to be level with
two consumers who purchased minimal scrap in March needing to
restock," he said. "(I) expect a soft sideways move for
One broker claimed that mills
will be wary of sending scrap markets down in April even if it
is only to help announced finished product price increases
"You could see $10 to $15 coming
off the top. (But) I would caution against a January price
return. Pipeline flow into yards and mills need to be
reconciled. We are at March 14 and its not there yet.
Spring, however, is right around the corner and that will have
an effect," he said. "Mills need to be cautiousthey are
all fighting for steel prices to stick. They do not want to
portray a scrap market in decline just yet."
The broker said it also was too
early to write off interest from Turkey, despite others
claiming otherwise. "Turkey is still here. They have interest
and that fact has relevance," he said. A sideways price move
"is not big enough to get people bearish. Im not saying
that the Turks will drive April, but they have not gone away
A Midwest scrap dealer said
busheling prices have already lost about $10 per ton on bids
and offers this week, while a broker in the region claimed some
mills and brokers were intentionally putting out weak
"One broker was out offering to
buy small volumes at down numbers. Maybe some mills are just
trying to push an agenda. I think scrap supply is in balance
with demand. Flows are not very good and some factors like iron
ore pricing are true, but it doesnt negate the fact that
theres very little scrap out there," the Midwest broker
"The only real question
remaining will be if the mills are receiving the scrap which
they purchased or if shipments remain slow," a Chicago dealer