NEW YORK Steel mills in Detroit were once again the first out of the gate this month with scrap price bids that met earlier speculation of a down market.
On May 1, sources said several steel mills in the Detroit area entered the market in the morning with bids at down $20 per ton from Aprils levels, with many expressing surprise at the early timing of this months negotiations.
Steel mills typically wait out the first few days of the month when market sentiment is negative in the hope that they can drive prices down further than the speculation, according to one broker who said he was surprised by the rapid developments in Detroit on May 1.
Numerous sources in the Detroit region said trading concluded at down $20 per ton across all ferrous scrap grades, with many reporting little resistance to the negative price movement.
Market participants had previously expected ferrous scrap prices in May to drop between $15 and $20 per gross ton in most regions from April levels (amm.com, April 25
A broker in the region said he had expected at least prime grades to perform a little better and not shed a full $20 this month due to supply tightness, but with just one major prime scrap consumer in the region, there was little support to prevent the drop.
A source at a mill that was first to complete its buy said it is now bidding at down $25 per ton for late offers.
I think the market was weaker than down $20, probably $25. But last month dealers came around to down $20, which was probably aggressive for them, and then this month we compromised and agreed to down $20, said the mill source, noting that developments in the yet-to-settle Canadian scrap market will also impact nearby Detroit prices in future sales.
I thought Canada would have been weaker, but it seems to have held at down $20 as well for now although (the Canadian market has) not come to agreement yet. I wouldnt be surprised if they agree to down $25 and then (one seller) can buy more cheaply in the Canadian market to sell into the U.S. Were done (at down $20). I am offering stragglers down $25, he said.
Another consumer in Detroit said dealers accepted down $20 prices only because they know the mill operating rates and export markets are off. Not much to use for negotiations to keep the market from dropping. Supply and demand is in check right now, he said.
A source at a large Detroit dealer confirmed demand from mills was a tad softer this month, adding that he expects inbounds to be off on cuts and shred due to the price drop.
Meanwhile, the May scrap market in Cleveland and Pittsburgh has started to take shape with one Cleveland mill offering down $15 to $20 a ton for material but with no major deals having been completed by late May 1.
While market players are speculating both cities could be down by $20 a ton as well, some report mixed signals. One mill buyer said he expects a widening in the spread between busheling and shredded scrap as busheling is diminishing in supply and shred is in abundance. Brokers indicated that Pittsburgh and Cleveland will consume a lot of prime this month, which could result in prices not falling with the rest of the market.
The two cities are also expected to have pretty healthy buys.
The labor strike at U.S. Steel (Corp.) in Canada means that its Pittsburgh mill will be busier, said a Pittsburgh scrap executive. Plus a Pittsburgh mill that was down for maintenance is back and needs scrap.
U.S. Steels Lake Erie Works in Nanticoke, Ontario, began a lockout April 28, with the company noting it could ship material from other mills to meet customer needs if necessary (amm.com, May 1
A scrap broker said that there are two or three mills in Pittsburgh that need to buy heavy this month. Pittsburgh and Cleveland have more demand for scrap than other parts of the country but steel is not doing well and this appetite appears to be localized, he said.
In Birmingham, Ala., one mill buyer has been buying various grades at a $20-a-ton discount to April and is now offering to pay down $25 a ton on shredded scrap. One seller to the mill said he was compelled to sell at down $20 a ton this month. I am selling because June does not appear to have any chance of being an up month and then I dont want to be holding a lot of inventory when summer hits, the supplier said.