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.
Shredded scraps 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 reasonable.
"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 months.
"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.