NEW YORK A late strengthening in obsolete scrap prices triggered by a rush to secure heavy melt and plate and structural scrap has worked to the advantage of steel mills that started their buying programs earlier this past week.
Market participants said a majority of the tons in Chicago traded earlier and at lower prices than at mills in Indiana, which were forced to chase obsolete scrap with more aggressive pricing.
As a result, obsolete grades in Chicago settled between $6 and $8 per gross ton lower this month vs. May, while mills in Indiana have averaged anywhere between sideways pricing to down $5 on their total buys for June, depending on grade and last months price level.
Prime scrap, meanwhile, traded sideways in both regions compared with May, sources said, leaving AMMs No. 1 busheling price in Chicago unchanged at $380 per ton.
In Chicago, several steel mills traded early and secured obsolete grades like No. 1 heavy melt and plate and structural scrap at $10 per tonne below last months levels, but the late entry of two consumers meant final averages for the market trended differently as later buys were concluded at higher prices.
Overall, AMMs June assessment for No. 1 heavy melt in Chicago finished at $335 per ton, down $6 from May. Sources said No. 1 heavy melt traded in a wide range of $327 to $340 to Chicago mills.
Chicago mills were able to secure better prices on plate and structural scrap than their Indiana counterparts as large volumes bought early took the overall assessment price in Chicago down $7 to $353 per ton, with Indiana averaging a few dollars higher.
Better availability of shredded scrap made it the weakest of the three grades, as it shed $8 per ton in Chicago to $360 per ton.
Indiana market participants reported several trades at prices well above the Chicago assessments, with several tons reportedly traded at numbers unchanged from May levels. In Indiana, it appears that plate and structural scrap was the hardest to come by, followed by heavy melt and then shred, several sources said.
One source said that mills in that region looking to secure some late tons will have to pay prices above May levels as dealers look to take advantage of the strengthening market.
"We definitely came out of the gate buying at sideways on prime scrap and down $10 on all obsolete grades. However, within a day of trading, we quickly started seeing dealers taking a firm stance and holding for sideways on their obsolete grades," he said.
While this buyers overall purchase finished a few dollars below May levels, he said that but by late Wednesday not one dealer was willing to sell obsolete scrap at lower prices. "To purchase any scrap today, we would be paying up money from Mays levels," he said.
A second source said that steel mills willingness to keep prime scrap prices unchanged didnt bode well for large drops on obsolete grades.
"I think that the mills desire to buy cheaper scrap was tempered by the early determination that prime was selling at sideways. Ten days ago the consensus was for obsolete to be down $20. That was not possible after the prime sideways talk," he said, also attributing some of the price strengthening to mills realignment of prices to some sellers who had over the months lost some ground on price value.
"I really think that most of the better sales might have been more price adjustments than anything," he said.
A third source attributed the rapid strengthening in obsolete prices to supply-side concerns. "People misjudged the scrap flow into dealer yards. Three months in (a) row of down money has a way of impacting obsolete scrap supply," he said.
However, he cautioned against too much optimism. "The short-term perception is that weve hit a short-term bottom. We just dont see a robust economy going forward. The fundamentals that were driving prices down havent really changed that much," he said.