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Shredded scrap prices offer mills best values

Keywords: Tags  ferrous scrap, shredded scrap, scrap prices, Chicago, Indiana, Alabama, Philadelphia, Detroit heavly melt

NEW YORK — Price differentials between heavy melt, plate and structural, and shredded scrap are poised to break free from historical spreads based on recovery values as another month of weaker shredded scrap prices has brought cut grades near—or on par with—shred in several regions.

In a few local markets, 5-foot plate and structural scrap has traded as high as $15 per gross ton over shredded scrap, according to some market participants.

The tight price spreads between better-quality shredded scrap and heavy melt helped prop up shredded values, with some June 5 trades reported at down $10 per ton after early shredded sales for June were reported the previous day at down $20 per ton.

Some suppliers called it a sign of a firming market that might not have been as abundant on shredded scrap supply as previously believed. Others said the late strengthening in shredded prices was more reflective of a move by mill buyers to secure the better-value grade compared with prevailing prices for heavy melt and No. 1 busheling scrap.

The push by shredders to stem a slide in prices also could help suppliers fight for smaller decreases for obsolete grades that trade late this week, according to a few traders.

Market participants said that mills in Chicago and Detroit have nearly wrapped up buying programs for June, but markets were yet to settle June 5 with sales still pending to some mills.

Business concluded so far in Detroit has resulted in obsolete grades trading down between $10 and $20 per ton, prime material moving sideways and shredded scrap losing $20 per ton from May.

Sales of obsolete grades in Chicago have thus far been reported at down $5 to $12 per ton, primes mostly sideways and shredded down around $20 per ton. Sources said shredders have pushed for drops of no more than $10 per ton on remaining volumes, with the air expected to clear on the overall market by June 6.

"It makes no sense to chase heavy melt and plate and structural scrap right now. Shred is where it is right now. We don’t shut out other grades because we want to have a mix and maintain our relationships with dealers. But we are definitely not reaching out for cuts," one Midwest mill buyer said.

Mill optimizers see shredded scrap as the main value grade this month rather than prime scrap or heavy melt, which has triggered "a chase for frag (shred)," one trader said.

Markets in Pittsburgh and Cleveland are still trading, with many expecting final prices to set historical price spreads between shredded and obsolete grades.

A healthy appetite among mills and supply concerns worked to keep the Alabama market from deviating much this month, according to market participants. Mill buyers reportedly were active in purchasing, which left them little leverage to dramatically pull down prices.

Alabama’s market settled June 5 with No. 1 busheling moving sideways and obsolete and shredded scrap slipping $10 per ton, recording a stronger performance than the Midwest and Ohio Valley markets.

The market in Philadelphia concluded most trading by June 5, with shredded scrap down around $20 per ton and prime grades trading mostly sideways.

"I still think business is good," one regional scrap dealer said of the softening numbers. "Once we get through the May and June slump, I think we are looking at a better picture in July and certainly by August."

Markets are still developing on the West Coast, according to one supplier. "Despite the earlier shred sales on the East Coast at down $11 to $20 (per ton), the West Coast export container market has picked up," he said. "There is a shortage of available shred for export, and certainly not enough for Asian demand. That has pushed the container export price up, and that is putting pressure on domestic buys to go sideways as their prices are already soft relative to export. (One producer) is trying for down $10 (per ton), but no major buys have yet been completed."

Lisa Gordon, Pittsburgh, and Rey Mashayekhi, New York, contributed to this article.

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