Scrap mart feels bite of curbs in finished steel

PITTSBURGH — Finished steel production outages are wreaking havoc on the domestic ferrous scrap market, with scaled-back melt schedules reducing mills’ scrap needs by at least 25 percent, market sources said.

Scrapyards with industrial accounts have reported an apparent slowdown in manufacturing, evidenced by the fact that prompt scrap flows into yards have subsided.

"Our largest industrial account, an auto stamper, is now sending 20 percent less than a couple of months ago," one southeastern source said.

A Pittsburgh source also noted reduced tonnage from his industrial accounts.

Mills are throttling back production in an effort to bring supply and demand into balance, but their discipline efforts vary: Some are taking a week or more for maintenance in October, while others are devoting only one week to rolling or melting four days per week.

One hot-rolled producer put lead times at two weeks for hot-rolled coil.

In Pittsburgh, two mills are buying half of their usual needs.

"The word of the day is ‘malaise’ and there is not a lot of urgency to make deals," one broker working at a mill-owned scrap asset said.

One mill buyer said he picked up a nominal amount of scrap early this past week, and by Friday had moved to the sidelines until the coming week.

And while the outages are more pronounced this year, there is a definite seasonal trend.

"The majority of it is seasonal ... (but) is it demand? If demand was great, they wouldn’t be doing this," one market source said.

"Normally there’s a November-December slowdown in demand. Manufacturing slows. Construction slows," one mill source said. "This year there seems to be a few big (outages), which works out well for the market. Lead times jump out because of the slow production, so everyone (buyers) on the fence jumps back in. Everything seasonal this year appears to be happening a bit earlier than what we’ve seen in the past."

"Historically, this is the slowest time of year. And then you have the ability to ramp up in the first quarter. I wouldn’t be surprised if people are taking some extra time now, given things are slower than they were expecting," a second mill source said.

Some Ohio mill buyers also said they might not enter the market until the coming week.

"There is no business on either end, and no one seems to care. We are taking our shredder down for maintenance and aren’t planning to participate in the market," one Ohio Valley shredder operator said. "With RG Steel gone, that means 500,000 tons are out of the market. You would think that alone would have improved demand."

Mills’ reduced requirements were mirrored by scrap sellers. "I sold 65 percent of my normal buy because I can’t replace my inventory at these numbers," one Birmingham, Ala., player said.

In the Southwest, a source who deals in scrap and finished steel said he was holding back a good chunk of his scrap. "We are only selling about half of our normal sales because we don’t have much material in our yard," he said. "Business is off at least 40 percent on the (finished) steel side."

A southeastern source noted that he is refraining from selling after one mill offered to buy scrap at down $100 per ton. "I don’t like it when I feel like the mill buyer is reaching in my back pocket when he is talking to me," he said.

In the Midwest, the downtime by mills has scrap sellers looking outside their normal market. "Scrapyards out of Chicago are offering tons to this area because of all of the outages in the Midwest," one broker selling into Atlanta said.

Chris Prentice, New York, contributed to this story.

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