NEW YORK Sustained weakness in fundamentals driving down the price of shredded scrap pushed all ferrous scrap grades lower in the Midwest as mills entered the market in earnest Sept. 5.
Early trading indicated that the Chicago market will finish stronger than Detroit after mills in the latter region successfully drove down prices further than originally expected. Although pre-trading speculation pointed to Detroit finishing weaker than other Midwest markets due to higher prices paid in early summer, the expectation that shred would drop $10 per gross ton in Septemberwith prime grades possibly moving sidewaysfell far short of reality.
Detroit-area mills entered the market early Sept. 5 and quickly concluded the bulk of their buying at prices down between $10 and $15 per ton on shred, $10 on primes and between $5 and $15 on different cut grades. Market participants said trend ranges varied depending on where business was concluded last month.
After the dust had settled, AMMs assessment for No. 1 heavy melt in Detroit settled at $343 per ton for September while shred settled at $354 per ton. Sources reported a wide trading range of $345 to $360 per ton on shred, with larger volumes reportedly at the higher end of the range.
Prime scrap grades No. 1 bundles and No. 1 busheling fell an even $10 per ton to $395 and $400 per ton, respectively, with machine shop turnings reportedly trading at $260 per ton.
A buyer for one producer said the big push for lower prices and dealers apparent willingness to accept lower-than-speculated decreases caught him by surprise. "I had a hard time understanding the market. Of course, I am happy to be able to buy a lot lower than the anticipated drops, but I couldnt figure out why it was happening. To me, the pressure has to be coming from outside the Detroit area," he said.
One Detroit-area scrap dealer said the entire market was pulled down by an overhang of shred. "My belief is this happened due to shred. Over the past few months, the spread between shred and bush has increased significantly and (I am) not sure it was the right thing for that delta to get any larger," he said.
"There was no question shred was coming down in September and it pushed down primes and cuts with it. If not, heavy melt could have been (down) more than shred. When shred fell, plate and structural had to as well because the mills would have simply bought more shred and not P&S (plate and structural)," he said.
AMMs Sept. 5 assessment for 5-foot P&S was $360 per ton, down $12 from August.
Market participants in Chicago and Indiana reported transactions at prices similar to those recorded in Detroit and indicated that the market is expected to settle Sept. 6.
In Philadelphia, scrap grades moved in either direction as the only buyer of No. 1 heavy melt raised prices by $5 per ton to $320. "(The price) is up $5 but he was low last month because of his outage," said a dealer in the area. Meanwhile, shredded scrap trades were reported at $345 to $355 per ton in Philadelphia, with 5-foot P&S trading at $350 per ton, down $5 to $10 per ton from August.