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Ferrous scrap prices seen moving sideways

Keywords: Tags  scrap, ferrous, price movements, scrap prices, steel, steel mills, procurement, survey U.S. scrap exports

NEW YORK — Midwest ferrous scrap prices will likely trend sideways in May according to early market speculation, with buyers and suppliers divided on whether the bias will swing marginally lower or higher.

Midwest mill buyers who responded to an AMM survey speculated a sideways to "soft sideways" market in May due primarily to warmer weather improving scrap flows into dealer yards. However, most Midwest suppliers who participated in the survey speculated that prices could trend completely unchanged from April’s prices or a "strong sideways," which implies modest increases of $5 to $10 per gross ton.

At least one-third of Midwest respondents, however, speculated that prices could similarly trend toward a "soft sideways" in May, meaning a decrease of up to $10 per ton.

One mill buyer said weak export activity and pricing; improved flow of obsolete grades; good scrap inventory levels at mills; and improved rail car and river flows underscore his reasons for a "soft sideways" market in May.

Midwest suppliers hoping for a slightly stronger price market in May said that demand from mills is expected to be higher than in April, which will absorb the improvement in obsolete scrap flows.

The return of one major steel producer is also expected to support prices as more demand comes into the market.

Some respondents said prime scrap could gain some ground while obsolete grades cede some ground should mill buyers push to "correct" the current price spreads between obsolete grade and prime grade scrap prices, which have thinned over the past few months.

Other factors market participants attributed their positive sentiment to ranged from rising steel prices to spring construction and road repairs. One Midwest dealer said continued freight increases have greatly reduced the radius of how far ferrous scrap can travel into domestic regions from exporters struggling to book overseas sales.

"The decline in tons being exported for the last several months has certainly helped keep prices fairly stable domestically. But the domestic market seems to be able to absorb the additional tons without driving the price down. This tells me domestic demand is pretty strong and could get stronger if any of the sectors other than automotive continue to pick up," one Midwest supplier said.

"Markets look to me to be fairly flat," a second supplier said. "There is some talk of trading down a little, but I think the flat-rolled business is solid enough to keep things sideways. Flows have picked up 20 to 25 percent on most obsolete grades, which to me is actually a little less than I would have expected coming out of one of the worst winters we have had in several years."

Meanwhile, a majority of survey respondents from the Ohio Valley said they expect their region to be a bit weaker in May than the Midwest since its mills "overpaid" for scrap in April.

Ohio Valley participants said they expect prices to trend in a "soft sideways" market, with only one-third anticipating a flat market.

In regions such as Arkansas, Tennessee, the Mid-Atlantic, Southeast and the West, market participants expect scrap prices to stay sideways next month, although nearly one-third of respondents in Philadelphia felt prices could trend a little lower.

Unlike past months, the Texas market could emerge as May’s strongest should current speculation become reality. More than two-thirds of the companies polled in Texas said they expect prices to trend stronger in May, with the remainder speculating that a sideways market would be their worst- case scenario.

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