shrinking spread between prime and obsolete grades of scrap is
expected to continue due to a tightness in supply of shredded
and cut grades of metal scrap.
remains tight and the short supply will lead to better prices.
With prime scrap now very close in price to shred in Detroit,
the demand for busheling will increase," one Detroit market
The Detroit and
Chicago spreads between No. 1 busheling and shredded auto scrap
stood at $45 per gross ton Dec. 1. It now stands at $14,
marking a $31-per-ton narrowing over the course of the
Other areas are
experiencing similar phenomena. In Alabama, the spread has
shrunk $5 to $27 per ton, and in Pittsburgh it has dipped $15
in one month to $32 per ton.
Steel mills are
expected to step up their purchases of No. 1 busheling and
bundles, which results in a higher metallic yield as it becomes
The scenario is
playing up for an unusual phenomenon, one Chicago source
"(Heavy melting scrap)
No. 1 and No. 2 will continue to be in very short supply, as
those grades are for the most part now being shredded. The
spread between prime and shredded will continue to compress to
where we could see the two grades on par or even inversed.
However, this will cause mills to chase prime more as yields
and chemistries are better, and once again open the spread
between the two," he told AMM.
The hierarchy of scrap
prices went awry in May 2012, with busheling selling at a
discount to shredded scrap (
amm.com, May 4, 2012).
The narrowing price
trend is due to a combination of tight supplies of shredded and
cut grades coupled with a relatively healthy manufacturing
sector, which is increasing the amount of prime scrap to the
The weather is also a
factor. "So far it is only December and it appears that we
might actually have a real winter this year. Weve been
spared for the last couple years, but the cold weather and snow
will slow down peddlers," one Birmingham, Ala., scrap processor
Peddlers are an
important source for obsolete scrap.
"Supply is weak and
this is the worst time to try and get material. It is just not
available. Ever work outside when its single-digit
temps?" one Pittsburgh scrap processor asked.
The pressure on the
tight obsolete grades is being felt at the scale houses of auto
"Some shredders are
already behind on their orders because of the slow inbound
(deliveries)," the Pittsburgh source said.
"We are hearing that
shred will again push the market in January and that some mills
are already pushing for January shipments on a
(to-be-determined price) basis," the Detroit source added.