NEW YORK A drop in demand
from several Midwest steel mills and expectations of a seasonal
improvement in scrap flow have combined with a lull in export
activity to send scrap prices down about $20 per gross ton
across the region.
Shortly after mills in Detroit
settled at down $20 per ton for all grades April 3 (
amm.com, April 3), one large steel producer set
the tone for neighboring Chicago and northwest Indiana with
bids down $20 as well, according to market participants.
Other mill buyers quickly
followed with identical bids, and despite initial resistance
from dealers, trading began in earnest by the afternoon of
April 3 as buyers refused to budge from their initial bids. A
majority of the trading in the region was completed by late
evening at down between $20 and $22 per ton, depending on scrap
grade and each mills previous months transactions,
according to sources.
In the Chicago area, No. 1 heavy
melt settled April 4 at $361 per ton, down $21 from March, and
No. 1 busheling also shed $21 to settle at $402 per ton.
performance was slightly weaker, with the Chicago market
settling at $390 per ton, down $22 from March, while plate and
structural scrap settled at $379 per ton, down $21.
"Most dealers agreed that
Marchs peak pricing was artificial and that some sort of
correction was going to happen this month," a buyer for one
Chicago-area mill said. "Supply also exceeded demand and there
is still a lot of scrap looking for a home."
A buyer for a second mill said
anxiety about scrap price expectations in the spring, which
traditionally sees strong scrap flows, also contributed to
dealers accepting a down-$20 market.
"Supply, I think, is a little
bit tighter but its matched by demand. I think people
started looking around and realized this is what it is and
theres a lot of uncertainty about May so they decided to
sell some tons," he said.
Several dealers said they put up
a meek fight for a down-$15 market, but with every mill bidding
at down $20 or slightly more, they felt prices were still
"We really didnt put up
much of a fight," one dealer said. "We started off trying at
down $15, but at down $20 we thought were still sellers.
We felt that as the days passed, the number could be discounted
even more. It was a demand-side pull. There were some mills
that didnt come into the market and other mills were
quoting lower numbers, which we didnt like. So we felt
down $20 was OK."
A second Chicago-area dealer
said his company was content with this months price drops
since demand from foundries also has faltered. "There are some
holes in the order books at steel mills," he said. "Weve
seen some shut down that we did not expect. And were
seeing slowdowns in the foundry market. Were also seeing
a build-up of new cars at (some auto companies) lots.
Other auto components makers are working five days instead of
seven days. So the sky is not falling, but its a little
bump on the road."
Aprils $20-per-ton price
drop comes on the heels of an approximately $40 rise in March
and a $10 to $20 decline in February, depending on the region;
before that, the market had been essentially flat for
"This is step one of a longer
correction as mills take out capacity. ... So scrap is a flat
market with April down $20. It was flat since November, went
down $20 in February, up $40 in March and now its down
$20 again. And scrap flows were fine through those months. So
its a great price for April. Thats why dealers
sold," one broker said.
The St. Louis market also
settled at down $20 across all grades, while prices in
Pittsburgh settled down $20 except for shredded scrap and No. 2
bundles, which settled at a $17-per-ton discount to March
levels. Even with less demand for No. 1 busheling, dealers
refused to take any more of a haircut on the prime grade.
There was no sense of urgency
among Pittsburgh mill buyers, sources said, and one buyer was
holding off entering the market until next week but said he
expects to do so at similar prices.
Youngstown, Ohio, exhibited a
similar performance to Pittsburgh and dropped $20 per ton on
all grades except shredded scrap and No. 2 bundles, which sold
down $15. Cincinnati, Ohio, mills picked up all their needs at
down $20 per ton as well.
Deals across the Southeast
wrapped up with prices softening $15 per ton across the board
in Birmingham, Ala., the Carolinas and Atlanta.
While suppliers in the Ohio
Valley and Midwest conceded at selling down $20 per ton,
southern sources indicated that low scrap inventories allowed
them to hang on to the extra $5.
In fact, not all Southeast scrap
suppliers were willing to sell at down $15. "It should be
sideways to down $10 at the most, so I have not done anything,"
a shredding source said.
Flows into Southeast yards are
slow and scrap sellers unanimously expressed a concern about
being able to replace the tons they have agreed to sell.
Lisa Gordon, Pittsburgh,
contributed to this story.