NEW YORK Early trading by a few Midwest steel mills eager to secure inventory helped lift July ferrous scrap prices in Chicago and Detroit, with prime scrap gaining more ground than obsolete (cut) grades for the second consecutive month.
While a few mills in Chicago started negotiations July 1, most mills in the Detroit region completed a majority of their buying by July 2 to make it the first city to settle, market participants told AMM.
One of the largest mills in the area set the pace for scrap prices in Detroit, entering the market with increases of $40 per gross ton for prime scrap and up $25 for shredded and $30 for plate and structural scrap compared with June levels.
Others were forced to follow the increases, with most buyers and sellers reporting that the Detroit market pretty much settled at those higher levels.
Scrap prices in Chicago didnt quite mirror Detroits movement, with the prime grades rising $30 per ton vs. June while increases for the obsolete grades ranged from $18 to $20 per ton, according to several sources.
Accordingly, AMMs No. 1 busheling price in Chicago settled at $410 per ton July 3, while shredded scrap gained $16 to settle at $376 per ton.
Concerns about flows of obsolete grades resulted in increases of $20 per ton for 5-foot plate and structural scrap and $18 per ton for No. 1 heavy melt as AMMs Chicago assessment for the two grades settled at $373 and $353 per ton, respectively.
Most Chicago-area mills wrapped up a large percentage of their buying between July 2 and 3, with a late push for additional volumes of plate and structural scrap leaving about 5 percent of the total monthly purchases pending for a few buyers, sources said.
Opinions differed on the reasons for strengthening prices, with some suggesting mills raised raw material prices to support previously announced increases, some saying it was supply driven and others indicating business at steel mills has improved.
A buyer for one Midwest steel producer said aggressive numbers from a mill in the Ohio Valley/western Pennsylvania region gave dealers ammunition to chase higher prices.
"(That mill) really played the market. And then Detroit came in really hard too. Dealer offers for prime scrap were low on volume, so its possible buyers maybe had a little trepidation," he said. "I dont understand why this market went up, period. Had the Ohio mills not done what they did late June, we would have had a sideways market. Suppliers I spoke to were fine with sideways a week ago. I dont think the fundamentals are there."
A Detroit-area market participant said the increases were justified by the lack of scrap at several dealer yards one week ago, while a second source in the region said buyers likely felt the increases were needed to cover their requirements for July and position themselves for August.
In the Indiana market, one dealer said a large producer had decided to wait a little as it was anticipating a slight softening in the market during the coming week. "They are obviously waiting for the market to settle lower, and it might very well do that. With that being the case, $410 on busheling ... might actually end up being too high," he said.
Another Midwest dealer felt the strategy had merit. "Flat-rolled mills have sort of passed three price hikes through. (Two mills) jumped into the market early at up $20, so I think they needed it up. I dont think theres that much footing under the steel price increases. The import boats are waiting to bring steel in. They needed scrap to be up," he said.
However, one broker offered another view. "(Companies) trying to say this markets softening is rubbish. This market is getting hotter and hotter. Youve got service centers that dont have steel. Until we start seeing more imports and service centers refill their inventory, the markets are going to stay up," he said.
Outside Chicago, Indiana and Detroit, prime scrap showed its strongest performance in Pittsburgh and the Ohio Valley as two mills drove prices higher. Competition between the mills for No. 1 busheling pushed numbers to as high as $455 per ton in some transactions, according to a few sources.
An outage at one Ohio mill increased production for a sister mill in Pittsburgh, which as much as $430 per ton on some deals vs. $382 in June, sources said. Prices in Pittsburgh and Cleveland had yet to settle July 3, although a local Cleveland mill paid as much as $440 per ton to secure busheling as it builds inventory, they added.
"Between these two mills, they are blowing out the prime market around here," a supplier to one of the mills said.
The race for material had a trickle-down effect in Youngstown, with prices paid for busheling landing, for the most part, at $430 per ton. Youngstown settled $20 per ton higher for shredded scrap, up $35 for other cut grades and $45 for busheling.
In the Southeast, negotiations were still under way as some mills in the Carolinas paid increases of $20 per ton while other mills remained absent. In Birmingham, the market remained active, with some deals concluded at up $30 per ton on prime grades and up $20 on shredded.
Lisa Gordon, Pittsburgh, contributed to this story.