Weather conditions and export demand over the next two weeks
will dictate the direction of Midwest ferrous scrap prices in
February, but neither has prevented a bearish sentiment from
sneaking into market speculation.
Midwest dealers and
brokers suggest that sufficient flows of prime grades like No.
1 busheling vs. anemic flows of obsolete material that is
processed into heavy melt and shredded could repeat January
trends, making prime scrap the weakest grade.
Scrap dealers surveyed
informally by AMM speculate that prime scrap prices
could trend sideways to down $30 per gross ton, with obsolete
grades poised to perform a tad better. The consensus fell
toward the median of that range.
participants reported poor inbound and outbound scrap flows
this month in Chicago and Indiana due to extreme cold weather,
with mixed reports on inbound flows from players in other
Midwest regions such as Detroit and St. Louis.
Repeated cold weather
snaps have seriously impacted metals processing and logistics,
Some dealers reported
up to a 60-percent reduction in torching and shearing
activities due to the effect of low temperatures on worker
safety and torching productivity, while shearing can cause
equipment damage. Baling also slowed due to cold hydraulic
oils, one dealer said.
Scrap shipments from
Chicago to integrated mills around the region were affected by
lake-effect snowstorms that closed down the interstate and
secondary arteries, sources said. At least one local mill
reportedly couldnt receive scrap on at least five days in
Shipments via some
railway lines have also suffered.
"Poor rail service is
keeping lots of scrap from shipping and shipped cars are seeing
much longer transit times. Also, steel mills seem to be taking
longer to get them unloaded and turned back to the railroads
for re-use," a second dealer said.
These delays could
negate drops in scrap flowing into dealer yards, some
As a result, mill
buyers and brokers are talking about scrap oversupply and
pushing for price drops of at least $20 per ton, with prime
scrap showing the greatest weakness, the second dealer
"Right now were
hearing (prices) down $25 to $30 (per ton) across the board,
but I dont see it if this weather persists," a third
source said. "The weather has been brutal. One mill were
dealing with does not have feedstock on the ground and is
pushing us to get them more material at current price
Several dealers said
they will have no choice but to resist lower prices.
"Nothing (is) coming
in, so nothing to sell in February. In our world we cant
even think of dropping prices on the scale," a fourth source
Many feel the
worst-case scenario for scrap suppliers is that buyers might
push prices down to December levels, with the best-case
scenario being a sideways market.
Opinion is torn on
which factor will win the February battle for price influence:
weather-related supply tightness that supports a strong market,
or supply excess stemming from poor exports that could push
"A lot depends on
export. ... If the East Coast sells inland, were screwed.
If they export, were flat," a fifth source said.
The market is poised
to drop even though "it really should not," a regional broker
"I have not heard
anything directly from any mills yet on what their needs are
for February, but at the same time have not heard (any talk)
about reduced programs. To me, this would normally indicate at
least a sideways market, but unfortunately with all the talk
about things looking down due to lack of export, it appears it
will drop even though it really should not. Exporters and some
large dealers have been dropping their buying prices and scrap
is still coming in," he said.
Meanwhile, others felt
that a dearth of obsolete scrap due to persistent cold weather
would prop up the market.