NEW YORK An
aggressive push for prime scrap in Ohio and western
Pennsylvania by at least one steel mill rumored to be short
material is expected to have a knock-on effect on scrap prices
in surrounding regions as the market begins to speculate on
Buoyed by the
mills recent rush for prime scrap, several dealers said
supply appears tight going into July and indicated that they
expect prime material to rise anywhere between $15 and $30 per
gross ton, depending on the region. Dealers said they also
anticipate a pricing uptick on cut grades and shred, with
speculation that obsolete prices in July could increase between
$10 and $20 per gross ton.
Due to next
weeks Independence Day holiday, many sources said they
expect mills will attempt to tie up tons first and prices
later, with the bulk of final price negotiations expected to
conclude in the second week of July.
forecast of a longer negotiating period in July is due to the
expectation that dealers will wait out the market longer in the
hope of securing better pricing.
"Dealers have made up
their minds that the market will go up $20 to $30 at least. No
one is talking any less, and some are talking more. Trading
will probably drag out to the week of July 8 in an effort to
starve mills of scrap because a number of mills in
the region are short," said a buyer for one Midwest mill.
"Other markets (like Texas, Mexico and the Southeast) still
appear to be more reasonable and are not yet affected by the
participants said one large consumer paid significantly higher
prices for No. 1 busheling in the Ohio and western Pennsylvania
market this week, but they were quick to note that they expect
the mill to pay well above the overall market due to trading
concerns with the mill.
A second source said
that continuing mill interest in prime grades and the
relatively lower interest in shred will once again increase the
price differential between busheling and shred in July.
At the same time, some
dealers suggested production outages at steel sheet plants
could encourage electric-arc furnace (EF) operators to push for
more scrap volumes when they return to buy in July.
"On steel, the AK
(Steel Corp.) Middletown (Ohio) outage may reduce some steel
supply, also with (U.S. Steel Corp.s Lake Erie Works) on
lockout. Added steel may need to come from EFs pushing scrap a
little more," a third source said.
"It appears the market
has set itself up for some type of increase. (Im) not
sure it is warranted, but emotions can sometimes be the
overriding factor, rather than supply and demand. It appears
mills in the Midwest are poised to give back some dollars (on
scrap) in July. Estimates currently range from $10 to as high
as $30," said another Midwest buyer, who expects shredded scrap
to attract more attention should prices for prime material
"The market is firm
and trending bullish for mills in Indiana and (to the east).
Iowa mills (are) slower, but that will not impact (the) leader
that is Ohio," one broker said.
A Detroit dealer said
he believes mills did not cover their needs in June and will
look to make full buys in July. Flows also are a concern, he
said. "Scrap is just not out there and our inventory numbers
companywide continue to go down, not up. With primes being as
tight as they are, I do believe this will put added pressure on
shred and cuts."
A St. Louis dealer
said he expects next month to go against historical trends.
"While July is historically a weaker market, given the summer
mill shutdowns and decent scrap flow, this July is an
exception. Inflow volumes are much tighter this go-around.
Ive already had people contact me to dedicate tonnages
going into July starting late last week."
An Indiana trader
agreed, noting that July could be the month dealers have longed
for. "(It) seems like this could be the month all dealers have
waited for. Markets seem firm. Some are calling primes up $40
to $50 or more. We will see. Mills that need scrap now are
pushing before the market really comes out. Seems like plenty
of interest in buying scrap(but) as we know, things
change every day."
Another Midwest dealer
said he was still uncertain of price direction. "The sense has
been the mills will have to pay up money, maybe $10 to $20. But
I suspect they will try to buy sideways and then give in a
little as they meet dealer resistance. We dont have much
coming in so our suppliers think up money will be out there.
All I really know is its dang hot, the economy sucks and
not much scrap is around from what I can surmise."