NEW YORK Uncertainty about scrap prices in the coming months, reduced buying programs by steel mills and a lack of clear signals from export markets combined to send April ferrous scrap prices down $20 per gross ton in Detroit.
Market participants across the United States said steel mills and scrap suppliers have begun testing bids and offers in other steelmaking regions as well, but the Detroit markettraditionally the first out of the doorwas the only market to have settled as of April 3.
Market sources in Chicago, northwest Indiana and St. Louis said buyers in their markets were aiming for the same $20-per-ton price drop, with some tons traded as of late April 3.
In Detroit, mills pushed out bids late April 2, most suppliers accepted the $20-per-ton drop by the next morning and the dust had settled by lunch, sources said.
"The market definitely picked up (April 2). In fact, many were surprised that we were even out buying already. We took a very strong stance at down $20, and once we were able to convince (one supplier) at down $20, others fell in line," said a buyer at one Detroit area mill. "Export markets are very weak, which has been a strong factor in domestic market pricing."
Suppliers in the region said a decline in demand from steel mills was another reason sellers accepted the $20 drop after initially indicating they would resist any cuts greater than $10 per ton.
Mill programs were off slightly and inbounds are expected to decline as well with Aprils price drop, according to a large dealer in the region.
"Suppliers are moving what is expected to come in and possibly hold back some tons. (They) just did not have many options this month. No one mill was really pushing the envelope looking for scrap. Export (is) relatively quiet and springboard deals were not as prevalent as they were last month," he said.
A second supplier said the resumption of scrap flow along northern sections of the Mississippi River as ice melts released pent-up scrap, contributing to more supply into the Midwest and consequently to lower prices.
A third supplier confirmed that demand from Detroit mills was lower this month, with supply marginally better and business "acknowledged to be iffy going forward with steel prices softening."
However, a source at a second Detroit-area mill said supplier sentiment was more a factor behind the price drop than any marginal dip in steel mill activity. "The main reason (prices dropped $20) is that suppliers dont have any confidence that pricing will be higher in May," he said.
A sixth market source said mills and foundries will have no problem filling orders in April at down $20 but expressed concern about scrap flows. "It does not mean scrap flows are better, but there is less demand. Up $40 (in March) didnt change the flow substantially last month; down $20 will not change the flow dramatically either. You have to wonder if the feedstock for shears and shredders is out there in large tonnages," he said.
"I think the feeling is order books look light, cash flow affects everyone and if you dont move your tons, the next yard will," another source in the region said. "No one feels 100-percent sure where the market is headed. Take the $40 (price increase) from last month, call it a belated gift and go forward."
Meanwhile, mills in Pittsburgh and the Ohio Valley are expected to pick up less scrap this month than in March as weakness in order books has prompted some producers to run at lower capacity rates or perform maintenance work.
One Cleveland mill bought shred at $390 per ton for April and expects to pick up the rest of its needs at $20 down across the board, a source said. A second mill reportedly finished its purchases at down $20 across the board.
In Pittsburgh, mills are expected to mirror Cleveland, but it remains unclear where the numbers will land as metal recyclers are not holding excessive inventory, sources said. One mill expects prices to be down $20 per ton but a second mill buyer said he is holding off making deals until he has more clarity.
"I expect the mills will try to push it down some since there are some outages and they have been posturing that they will buy less," a Pittsburgh scrap supplier said. "Maybe theyll sell their steel at a discount since the scrap price increase last month was the excuse for them trying to raise steel prices."
In the Southeast, Birmingham, Ala., players are expecting prices to settle down between $15 and $20 per ton. One Birmingham mill is making a full buy and has entered the market, securing some shredded scrap and some No. 1 busheling scrap at a $20 discount to March levels, but it is still unclear where cut grades will settle.
A supplier to Birmingham mills said that demand has not changed, and attributed the falling prices to softer export activity and aggressive mill offers. "Demand is basically the same. This is a reaction to weaker export sales and one mill trying to take advantage of the situation," he said.
In the Carolinas, one mill has picked up the majority of its scrap at down $15 per ton. A Carolina mill buyer said that business is not robust but is stable and steady. A second Carolina producer had not picked up its program for various mills but did exercise its end-of-month cancellation rights for all orders that were not delivered by March 31.
Lisa Gordon, Pittsburgh, contributed to this story.