NEW YORK Supply-side
fundamentals prevented ferrous scrap prices from falling
drastically for a third consecutive month after mills in
Detroit traded at unexpected price levels June 4.
Following recent trends, steel
mills in Detroit were the first to begin trading for June, and
once again buying took less than a day to complete for most of
Participants said most
Detroit-area mill buyers stepped into the market with bids
before lunch, and most negotiations and trading were completed
When the dust had settled,
primary grades in Detroit traded sideways to May, while
obsolete grades and shredded scrap were down by $10 per gross
ton. Market sources previously speculated that prices would
fall between $10 and $20 per ton in June, with prime grades
expected to perform better than shred in an attempt to restore
value-in-use price differentials.
Several sources said late June 4
that Chicago had started trading at similar levels.
Junes price movements were
not as severe as originally expected due to growing concerns
about scrap flow.
"I think the mills are listening
to the dealers about low inventories, and down any more than
$10 (per ton) could make matters worse. I buy into that
theory," one buyer said. "My feeling is this is the bottom. I
just dont see any real uptick for the foreseeable future,
There were fears that prime
grade prices would actually reverse momentum and trend upward
this month, a second mill buyer said. "There isnt a lot
of prime in dealer yards. If you look at what it was for the
past three to four months, theres nothing now. I find it
amazing we got sideways and not up pricing. Prime started
leaving the area. Whats kept it from coming back up is
that there are so many people that use a scrap optimizer that
if they let the prime price run up too much, the optimizer will
switch you back to shred."
A third mill buyer said there
was little reason to send prime prices down when demand is
expected to be quite strong for No. 1 busheling and No. 1
bundles this month.
Despite reports that auto plants
are not planning any outages in June, which would improve prime
scrap supply, the third mill buyer said it was pertinent to
play in the now. "Prime scrap is the one item people are
looking for. Why play with June even if theyre saying
auto will run good and offer good supply? You take what you
need now, and if the supply from auto is strong in June you can
try fighting for that $10 in July," he said.
Buyers said there was very
little resistance to their initial bids of down $10 on obsolete
grades and flat pricing on prime grades. Some said shred was
the easiest grade to book at down $10, with several sources
saying there was still plenty of shred on offer even after
mills had completed their buying.
According to different sources,
mill demand for scrap in June appears to be about 10 percent
higher than in May for obsolete grades and shred and relatively
unchanged for prime grades.
However, at least one source
felt demand was lower for prime grades. "I think there was a
weakening in mill demand, because otherwise primes would not
have traded sideways," he said. "Prices would have gone
Meanwhile, a large dealer/broker
said demand is being pushed by stronger order books at
electric-arc furnace flat-rolled steel producers, while a large
scrap dealer called it a "supply-driven market."
Most suppliers said they were
content with Junes pricing.
"Mills dont have scrap,
and dealers are sick of getting pushed down every month so
suppliers have been selling shorter in the down markets," a
second scrap dealer said.
A second dealer/broker said
scrap supply and demand seems to be in balance in parts of
Ohio, Michigan and Indiana, while there appears to be a surplus
on the East Coast and in Canada, Florida and Texas.
A Midwest broker said he expects
Detroit-area mills to pay sideways prices on any remaining
volumes of obsolete scrap on the expectation that mills will
chase more tons later.
Most buyers in the region,
however, said they had either completed their buys or were
extremely close to completing them at down $10 on obsolete