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Mill cancellations portend Feb scrap price drop

Feb 03, 2020 | 05:53 PM | New York | Mei Ling Toh

Tags  ferrous scrap, scrap prices, shredder feed, shredded scrap, busheling


Shredder feed prices in the United States continue to weaken as shredders brace for finished scrap prices to drop in February, while mills issue end-of-month cancellations.

A majority of mills have turned away all undelivered material from their January buy effective Friday January 31, solidifying the expectation that scrap prices will drop this month.

The February market is expected to be disjointed, with each city making independent moves according to its needs.

The Midwest is expected to be at least two-tiered, with prime scrap holding up better than shredded scrap and cut grades.

One Midwest mill buyer is anticipating a $10-30 per ton drop depending on the grade. A river seller said the mills in the Detroit region are targeting the steepest reduction on plate and structural scrap - which could drop by $30 per ton - while shredded scrap could fall by $20 per ton and prime scrap by $10 per ton.

"This wouldn't surprise me because of the pressure on obsolete grades coming from the export market. The sheet business is doing the best - that's where the volume is right now," a seller in the Midwest said.

A second Midwest mill buyer said that it would make sense for the price spread between prime scrap and shredded scrap to widen.

No1 busheling traded at $300 per ton in Chicago last month, $3 per ton above the shredded scrap price of $297 per ton. This spread is extremely narrow compared to January 2019, when the spread between the two grades was $50 per ton.

Mills in the South, however, are considering a $20 per ton drop on prime scrap, while regions influenced by the export sector, including Philadelphia and the Carolinas, could see prices move down $30 per ton, according to an East Coast broker.

No1 heavy melt, export yard buying price, delivered to yard Philadelphia was $205 per gross ton on Monday February 3, down $45 per ton since January 17.

The latest US cargo to Turkey sold at $267.50 per tonne cfr for HMS 1&2 (80:20), down by $4.50 per tonne from the January 29 bulk deal that concluded at $272 per tonne cfr for HMS 1&2 (80:20). Offers are in the $255-$265 per tonne cfr range, according to a seller to the Philadelphia docks.

Despite the pessimistic atmosphere, many sellers believe the mills could overplay their hand if they seek discounts of more than $20 per ton.

"Down $30 [per ton] may not be the smartest thing to do because it will knock the underpinnings on their steel prices. Also, flows are not as stunning as everyone claimed and anyone who had shreddables already dumped their material in January," the Midwest seller said.

A Midwestern shredder source said a $20 per ton reduction is acceptable, but it will likely hurt scrap flows. "Flows are okay, but they are not great. We have less to offer in February [compared to January] and I do think the mills need material."

A Midwestern broker agreed, noting that scrap flows "didn't come in droves" despite the warm winter weather and improved prices. "Everyone will do business at down $10 [per ton]...Down $20 [per ton] would cause people to drag their feet."

Fastmarkets' price assessment for steel scrap shredder feed, fob Midwest mill was $126.14 per gross ton on February 3, down 3% from $130.05 per ton a week before, after four shredders reduced their scale buying prices by $10-$22 per ton.

The assessment for shredder feed, fob Ohio Valley fell 11.2% to $114.87 per ton from $129.43 per ton a week prior, while the assessment for shredder feed, fob Southeast dropped 2.7% to $126.25 per ton from $129.82 per ton previously.

Lisa Gordon in Pittsburgh contributed to this article.


 

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