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Chicago scrap drops after speedy May talks

Keywords: Tags  scrap prices, ferrous scrap, steel scrap, Sean Davidson

NEW YORK — Steel mills and their suppliers spent little time negotiating scrap prices in Chicago and Indiana this past week as both sides agreed to follow a mostly down-$20-per-gross-ton trend set a few days earlier in Detroit.

Most mills in Chicago and nearby Indiana began tying up tons on May 2, and by the afternoon of May 3, the few that decided to wait out the market slightly had also wrapped up their May buying programs, according to several market participants.

When the dust had cleared and the bulk of trades had been completed, AMM’s assessment for No. 1 heavy melt prices settled in Chicago at $341 per gross ton for May, down $20 from April levels.

Though both prime grades and shredded scrap began trading early at prices down $20 per ton from April, many sources said shredded prices weakened further in the last quarter of trading. As a result, AMM’s shredded scrap assessment for Chicago settled May 3 at $368 per ton, down $22 from April, while No. 1 bundles fell $20 per ton to $371 per ton. No. 1 busheling finished the bulk of trade at $380 per ton for May deliveries.

"It went a little easier. Everyone was in agreement that down $20 was the level. Shred took a slightly bigger hit because it’s in very good supply," said a buyer for a large producer. "I was surprised at how quickly things settled. I think there’s just this general feeling out there of weakness, with nothing positive on the horizon."

A buyer for a second mill said there had been a lot of discussion on whether May prices had hit the bottom.

"I looked back at last year and found that in July and October, primes traded $40 below where we are today. Demand is going to continue to be kind of where it’s at now or softer, unless exports came in or supply gets tight to a point where demand outstrips it," he said.

One Midwest dealer said he thought the down-$20 bids from mills were a "gift" because prevailing market conditions, such as weak exports and finished steel demand, meant "prices could have been a lot weaker."

Outside the Midwest, markets in the Southeast—including Birmingham, Ala., the Carolinas and Atlanta—settled down $20 across the board. Some sellers in the Carolinas reported caving in and accepting down $25 a ton on cut grades of scrap, but those transactions were few.

A few regional sellers indicated they were surprised that No. 1 heavy melting scrap dropped with the rest of the market as there appears to be less of that grade available. Recyclers have been steadily feeding No. 1 heavy melt into shredders because shred commands a nice premium in pricing.

Scrap sellers in the Southeast said they are leery about the June market and didn’t put up a fuss about the $20-ton discount. "The report is out there that there will be no export market for a while, and even though it is a hard pill to swallow, people are willing to sell at down numbers," a national broker said.

In Ontario, the U.S. Steel Corp. labor strike is so far showing no signs of wearing on the market, and participants indicate the market has settled at down $20, but this could not be confirmed by deadline.

Youngstown, Ohio, settled down $15 on prime grades and down $20 on other grades. Mills in Youngstown, as in Pittsburgh and Cleveland, are competing for prime scrap, which kept busheling prices from moving down $20. In Pittsburgh and Cleveland, prime scrap may also finish at down $15 when the dealmaking is concluded.

Pittsburgh and Cleveland look as if they will not finish their buying programs until May 6, sources said. "Certain consumers are done with their buys, some deals are being done now and some consumers are dragging it out until Monday," the national broker said.

Shredded scrap had sold into Cleveland at $370 and $375 a ton and into Pittsburgh at $370 a ton. Heavy melting scrap in Cleveland may not settle down the full $20 either as there is decent demand for this grade, sources said.

Lisa Gordon, Pittsburgh, contributed to this story.

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