NEW YORK Ferrous scrap
prices appear to be leaning toward another price drop in June,
according to early market speculation.
Although price trends are
expected to vary significantly for different grades and
regions, most sources surveyed by AMM said they expect
a sideways or slightly softer June pricing environment.
"The general consensus seems to
be unanimous in thinking that June will show additional
softness. This generally becomes a self-fulfilling prophecy,"
said one broker who expects the price differential between
prime and cut grades to widen a little in June.
Most mill buyers and suppliers
said they anticipate some Midwest markets to be weaker than the
Ohio Valley and Mid-Atlantic, with the South and Southeast
expected to fall somewhere in between. The variations will
relate to supply and demand balances, which appear to be at
equilibrium in some regions and not so far off in others,
according to several sources.
A buyer for one steel producer
said he expects prime grades in Chicago to drop $10 per gross
ton and shredded scrap to fall $15 per ton from May, while
prices in the Ohio Valley could trend sideways on prime grades
and be down $10 on shred.
Other Midwest buyers and sellers
said they expect price drops of anywhere between $10 and $20
per ton in the Midwest, with prime grades likely to trend
slightly stronger than shred and obsolete grades. A few
sources, however, felt the overall market could trend closer to
Market participants speculated
similar drops of $10 to $20 per ton in the Southeast,
Mid-Atlantic and Texas, with prime grades there also expected
to perform better than obsolete grades.
The expectation that prime
grades might experience less of a price decline than other
grades comes as some sources say demand for prime looks likely
to rise, even as overall scrap demand is largely expected to
hover around the same levels seen in April and May or even come
off a little.
Demand for prime grades like No.
1 busheling is expected to rise in June because some mills
"came up short" on the grade in May, according to one market
A second broker agreed, saying
that demand for prime will stay strong because electric-arc
furnaces (EFs) are not expected to change their melt. "Most EFs
are not going to all of a sudden switch to an all-frag (shred)
heat, which is cheaper and has better supply," he said. "Melt
shops got used to the drug that is busheling. Yield to value
was great. That party is largely over as the grade and its
overhang has been tapped pretty much out. We are back to a
balanced supply-demand curve on busheling. EFs will continue to
pressure the grade for the next few months until we see spreads
get to $30 or morea more traditional bush-to-shred
However, most participants said
that any spike in demand for prime grades will be met by
sufficient supply, thereby negating much price impact.
Meanwhile, most Midwest sources
contacted by AMM reported a steady scrap supply, with
only some suggesting flows from industrial accounts and
obsolete collections had dropped following two months of price
A source at a large scrap
company echoed the consensus view, saying that flows into yards
have been reasonable but not "overwhelming."
A buyer for another Midwest
steel producer said there was little concern about supply. "My
remote vendors say supply is great. More locally, theyve
told me supply is okay and hasnt fallen off despite the
price decreases," he said. "Some dealers here think prime
shouldnt go down and claim that some mills are buying at
sideways. Im on the fence with this one. Industrial scrap
generation is not tied to pricing so it should go down."
A third buyer said he had heard
conflicting reports on the strength of scrap flows, "but
regardless of whether theyre up or down, they seem to be
adequate to cover demand. Dealers so far seem content to keep
their scrap moving. Neither dealers nor consumers seem inclined
to build inventories. Steel markets continue to feel weak and
uncertain as steel pricing continues to drift down on most
Although some suppliers pointed
to recent price increase announcements by a number of steel
sheet producers as a positive for scrap prices in June (
amm.com, May 23), others were more skeptical.
"Regarding the price increases,
we dont really believe it," said a scrap buyer for a
fourth steel producer. The buyer said he had received offers at
down $15 per ton in the Midwest and responded with bids at down
$17 to $18.
"It appears we are going into
another soft market in June for the third month in a row,"
another consumer said. "With finished goods struggling to find
a home and margins squeezed, the metalworking industry
continues to flounder, as witnessed by quarterly earnings by
steel mills. The export market would be the only thing to hold
the market up, but that is pretty much nonexistent at this