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 July pricing.
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.
Participants 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 Ohio market."
Several market 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 spike.
"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."