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Midwest ferrous scrap prices look set to fall

Keywords: Tags  scrap, steel, ferrous, Chicago, Indiana, Iowa, Philadelphia, heavy melt shredded scrap

NEW YORK — Ferrous scrap prices for obsolete grades and shredded in critical markets such as Chicago and Indiana are poised to soften in May, with market participants reporting price decreases for volumes traded May 6.

In Chicago’s local market, sources said minimal buying programs at two steel mills, an oversupplied shredded market and the absence of firm trading into larger, neighboring markets helped a third Chicago-area producer systematically lower prices from April’s levels.

Shredded scrap sales were reported at down at least $15 per gross ton, indicating that Chicago’s market appears to have followed the previous day’s movement in Detroit (, May 5).

Early transactions on prime and obsolete scrap, however, appear to have broken from Detroit’s sideways trend and reportedly traded from sideways to down $10 per gross ton, depending on grade and April’s price level, market participants said. Machine shop turnings are likely to record further weakness, sources added.

Several suppliers said that large mills in neighboring areas such as Iowa and Indiana have bid for a $15-per-ton decrease in cut grades such as heavy melt, but none confirmed any business at those levels.

Reduced production at Pittsburgh-based U.S. Steel Corp.’s Gary (Ind.) Works due to an iron ore shortage (, April 28) and significantly weaker demand from a second Chicago-area producer resulted in lower demand for Chicago’s suppliers, who are left with two local homes for May or will have to ship volumes outside the local region, sources said.

"I think the local area recognizes that the tons here won’t be placed. If you’re a shipper that doesn’t like shipping too far, you have to ship to the remaining buyers in Chicago, so buyers could take prices down," one market participant said.

"There is enough shred overhanging the market, and guys are so concerned about where the June market is headed that they just want to place their tons and not have to worry about carrying too much into June," one mill buyer said about the drop in shredded scrap prices.

Prices for prime grades such as No. 1 busheling and No. 1 bundles have held their ground due to strong demand from flat-rolled coil producers and integrated mills, according to one trader. "They are running enough that they will need busheling. People are not willing to sell busheling at down money," he said.

Meanwhile, market participants in Philadelphia said scrap traded at predominantly sideways levels this month.

"Sideways. Nothing exciting. Not a whole lot of tons," one scrap dealer said. "Our hope is that the mills and foundries stay steady and can build on that as the year goes, but we were hoping for that from the beginning of the year. There’s not huge demand, either; the mills haven’t broken 80-percent capacity."

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