Philadelphia ferrous scrap dealers faced a new challenge this
month after one of the three steel mills they supply changed
its specifications for two key grades.
According to several
sources, Evraz Inc. North Americas Claymont, Del., mill
asked dealers to supply 3-foot plate and structural scrap
(P&S) and 3-foot No. 1 heavy melt scrap (HMS) this month
without any warning that such a change was imminent.
historically sold the mill standard 5-foot specification
product, and were only informed of the change late last week,
The sudden shift was
triggered by Chicago-based Evraz NAs strategy to reduce
its melt to a two-bucket charge from a three-bucket charge in
order to lower operating costs, sources said.
Dealers struggled to
secure sales and spot pricing for traditional 5-foot No. 1 HMS
and P&S as a second mill halved its demand due to a planned
outage, and a third mill tying most of its tons to contract
pricing with little spot market presence.
Aside from Evraz NA,
Chicago-based ArcelorMittal USA LLC operates two mills in
Pennsylvania to complete the local destinations for scrap
suppliers in the region. With Evraz NA moving to a different
length on cut grades, the only ArcelorMittal mill in the spot
market for cut grades was able to lower No. 1 heavy melt prices
by $5 per gross ton to $315 as it sought very little scrap due
to a near two-week outage. Dealers, meanwhile, aimed for a
sideways to slightly stronger market, citing exports.
and Evraz NA are now debating a viable premium for the 3-foot
grades that the mill is looking to secure, sources said. For
the trades reported so far, it appears to have paid a $20
premium. But sources say the mill is looking to drive that
"Its hard to
make 3-foot heavy melt. You need a stationary shear and you
have to shorten the strokes on your shear. It takes more time
to make. Mill buyers think it should be at a $10 premium to
standard No. 1 HMS and dealers think it should be at $20 to
$25," one source said.
likely to let the premium drop below $20 per ton, a second
"Dealers will need at
least a $20 differential to make it work for them. (One scrap
company) supplied Evraz Claymont the 3-foot grades for a test
run in July and they found some value in the change. I think
they must be convinced there will be a savings going to the
two-bucket charge," the second source said. "How much in
savings that brings them I dont know yet. Hopefully, it
will be more than the additional cost of the 3 foot. Dealers
will let us know soon enough if $20 will cover it. They
arent going to do it to just break even."
It is still unclear
how many dealers are prepared to tweak operations to supply
Evraz NA with its new requirements.
they will have operational savings with fewer bucket charges,
and that makes sense. But this will mean dealers having to make
big adjustments in the next 60 days and it will be interesting
to see which ones do," a third source said.
ArcelorMittals mills in Steelton and Coatesville, Pa.,
however, Claymonts change could be a positive
development, a fourth source said. "Claymonts drive for 3
foot will make more 5 foot available for the ArcelorMittal
mills. It will be interesting to see what this does to
Evraz NA did not