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Early indications point to possible scrap fall

Keywords: Tags  ferrous scrap, scrap prices, plate and structural scrap, shredded scrap, Sean Davidson

NEW YORK — U.S. ferrous scrap prices could drop anywhere between $10 and $20 per gross ton in April, depending on region and grade, according to early speculation in the industry.

Although most sources said there has been no real activity, some mills reportedly have concluded early trades for low volumes of plate and structural scrap and shredded scrap in a down $10- to $20-per-ton range.

Market participants said they expect most major steel mills to come forward with bids by April 2 or 3.

With many predicting an April price softening, several Midwest mills reportedly have cut back on pending March orders in hope of buying material cheaper in just a few days’ time.

Meanwhile, many suppliers said they will fight moves to drop prices by more than $10 because a bigger decline would shut down scrap flows in the Midwest, which remained tight despite large price increases in March.

A general belief mid-March that many suppliers possibly committed more tons than they could deliver—called a paper sale—appears to have proven only partially true (, March 14), with some regions experiencing better scrap flows than others and sources both at mills and scrap companies reporting the paper sales weren’t as bad as previously imagined.

"I think in the east, Pittsburgh and Ohio, the shipments were good enough, but some paper was shipped. I do not think as much paper was sold as what was projected. As you move further west, maybe shipments were worse into (a Chicago mill) for example," said one source.

A second Chicago source said mill receipts appear to have been slow in March, but it was "more related to lack of flow into shredding yards."

A third source said one Midwest steel producer stated in the past week that it expects to receive 70 to 75 percent of what it bought for March, while a fourth source pegged paper sales at 30 percent, up from a monthly norm of about 15 percent.

The slight decline in actual deliveries in March could force some mills to step in early during the first days of April as they look to cover a possible gap in material.

"I think there is some unshipped material, with the flow being less. I think the cancellation of orders could cause a gap in shipments. That is why I think the mills will have prices early in the week. Also, rail car availability is not the best right now," a fifth Midwest source said.

"(Due to the cancellations), it does look like ferrous is off some. Mills (are) said to be looking for down $30; dealers (are) looking for sideways to down $10," he said. "Around here, scrap inflow is the lowest in the past 24 months. It’s really hard to accept down anything. However, with steel mill production mostly flat and lack of export scrap sales, it might not take long to get supply ahead of demand. I just don’t think that is the case yet for early April."

One broker speculated that the drop may not be as large as others are forecasting, despite weak export demand, precarious flat-rolled steel prices and drifting demand for finished product.

"Scrap is tight, demand looks weaker and this market is trading pretty thin. I would hate for everybody to go into this and think the market is down and it really is only down $5 to $10," he said. "Many mills are canceling so there is a bit of a negative bias, but I am not sure today dealers are going to participate early at down $20."

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