NEW YORK The price differential between No. 1 busheling and shred in the Midwest nearly doubled this month following an aggressive push by steel mills in the region for prime scrap coupled with a more-than-sufficient supply of shred.
For the second consecutive month prices for No. 1 busheling gained significantly more ground than shred, returning the price differential to historic levels of nearly $30 per gross ton.
Mills in the Detroit region once again this month were the first to conclude trading at increases of $40 per ton for prime grades and between $20 and $30 higher for most cut grades and shred. This set the pace for other Midwest markets, as mills in the Chicago, St. Louis and Indiana regions opened the door to price negotiations while tying up volumes on a price-to-be-determined basis.
When the dust had settled, market participants said prime grades in all three regions were up about $30 per ton over Junes levels, with cut grades like No. 1 heavy melt gaining about $20 on average and shred anywhere between $15 and $25 higher than June pricing.
Even a late push by some Indiana mills to lower prime scrap tags did little to change the overall increase, as AMMs Midwest Ferrous Scrap Index for No. 1 busheling settled July 10 at $410.74 per gross ton, up 8.8 percent from $377.37 a month ago.
Heavy melt prices outperformed shred in July, with AMMs Midwest Ferrous Scrap Index for No. 1 heavy melt settling July 10 at $356.07 per ton, up 6.2 percent from $335.17 in June.
Meanwhile, shredded scrap prices managed a relatively weaker 5.4-percent increase, with AMMs Midwest Ferrous Scrap Index for shred settling July 10 at $381.06 per ton vs. $361.38 last month.
As a result, the price differential between No. 1 busheling and shred moved to $29.68 per ton in July from $15.99 a month ago. Sources said Julys price differential between busheling and shred reflected the historic spread between the two grades.
Prices for heavy melt and shred benefited in July from the rush for prime grades triggered by aggressive buying by a mill in Ohio at prices significantly higher than those recorded in Indiana, Detroit and Chicago, sources said.
"Busheling set the market. It created a wave in the market. With busheling rising, it pulled the other grades up. There were also more exports, so supply was leaving the U.S. even if the export price wasnt high. It all contributed to the increases," said one source.
Market participants said demand from flat rolled steel producers remained strong in July, and dealers said they did not record any meaningful change in demand from rebar manufacturers.
Several sources said mills in Indiana continued to pay prices well above those in the Chicago area for heavy melt and shred, with Indiana mills relying heavily on local supply.
"It seemed like getting to deals there was like a tug-of-war that ended with neither buyers nor sellers too happy about how transactions came down," a second source said.
However, most dealers said they offered no resistance to the increases announced early July, with the only push-back coming when some buyers tried to tie up late tons under the previously announced increases.
A third source called it a perplexing market as price movements for most months this year have gone against historical trends and overall market conditions. "Operating rates are going up and there is less scrap out there to buy. And yet many dont feel the price increases were justified from a finished steel demand and price perspective. Today I raised the prices at a lot of our yards and still nobody seems to think the prices will bring out more scrap. The whole thing is so consistently inconsistent this year," he said.