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Early scrap sales signal a seller’s market in Jan.

Keywords: Tags  ferrous scrap, scrap prices, busheling, shredded, bundles, scrap demand, Lisa Gordon

PITTSBURGH — Early scrap sales at the start of the new year could bring another robust month for obsolete grades, while the outlook doesn’t bode as well for prime grades due to ample supply.

One shredder reported a sale into an Ohio mill at $440 to $455 per gross ton, up $20 to $25 from December levels, while another shredder said he unloaded a large quantity into the Midwest at a $15 to $20 premium.

Scrap dealers are also shipping material out on a to-be-determined basis to accommodate mills that ended the calendar year with low inventories on the ground. Dealers don’t always agree to sell for an unspecified price in an up market but are doing so because they are confident of its strength.

The market is expected to kick into high gear Jan. 6, with demand stronger than it has been for months.

"Many mills took time out in the last couple months of the year, but it looks like all the mills are in for a healthy buy this month," one Pennsylvania scrap processor told AMM.

With all mills looking for scrap at the same time, coupled with low inventories at most mills, January is expected to be a seller’s market.

"I think the shred and cuts will be up $20 to $25 on low supply in the Midwest. Primes are still the wild card," one broker representing a group of mills said.

No prime deals have been reported, but busheling and bundles aren’t expected to perform as well as the shredded and cut scrap grades. The spread between shredded and prime has been quickly evaporating, narrowing to $14 per ton in December from $45 per ton previously, with the trend expected to continue (, Dec. 24).

The narrowing of the spread is a combination of strong manufacturing activity and tight levels of obsolete scrap. Two Ohio mills are in the market for obsolete scrap, but with small or limited buys of prime material.

To take advantage of the tight obsolete grade scenario, some cut grades could be sourced from exporters who are hoping to sell scrap into the domestic market in a quiet export arena. Due to quality and size issues associated with export-grade material, exporters could find homes for their material at rebar mills.

"With scrap in short supply, the exporters may come inland even though the quality is not the best," one source in Philadelphia said.

The recent weather is another factor.

"There was virtually no flow on obsolete scrap into the yards in December due to weather, and it looks like the same is going to happen in January. I do not think the mills can buy all their melts for January and get them shipped due to (inclement) weather and lack of flow. I think we are now in a 60-day market on firm prices going forward," one shredder source in Birmingham, Ala., said.

An Ohio Valley source agreed that this market could have some strength to it. "In light of the January weather, and weak inventories to begin with, I expect mills will come up short heading into February," he said.

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