An overhang of obsolete material at the end of negotiations in the March ferrous scrap trade in the United States has sellers mixed over what is in store for April.
While mills are still chasing and open to buying prime material for the March order books, secondary grades - including No1 heavy melt and shredded scrap - are only able to find homes if sellers are willing to sell below market value.
“‘No, thank you’ prices from the mills are looming,” a seller into the Ohio Valley and Southeast said, referring to price offers the mills issue that they expect will be rejected. “I expect mid-month downward adjustments are coming for shredder feed. The first sale was the best sale; and at these prices, scrap is coming out of the woodwork. At the same time, busheling could get even tighter.”
For the most part, the Midwest, Ohio Valley and most of the Southeast had mills offering to pay up $70 per gross ton for prime material and $50 per gross ton for secondary material.
The trade, which basically closed in 24 hours, was quick a one because there was so much scrap available and sellers were eager to capitalize on the higher prices.
“There is so much scrap out there that mills were covered in a matter of minutes and mills began ghosting the little guys. April will be down due to sheer volume of scrap. Supply is not going to be any worse in April than in March. It will be better because spring will be here. Pretty much everyone jumped on $50 per ton more,” a seller into Chicago said.
But other sellers were not convinced that April will see a price retreat.
“Mills will be even busier and bought conservative this month,” a seller into the Indiana market said.
According to a seller into the Detroit market, “a lot of paper is flying around in the spring breeze, and a lot of paper was sold at these prices.”
The practice of selling paper - which occurs in up markets - refers to dealers selling more scrap than they have in their possession and then trying to chase additional tons to fill their orders.
A seller of busheling into Detroit said he was confident for April as well.
“March weather can be devastating with rain and snow, so I am not bearish,” that seller said.
Meanwhile, the St Louis and Arkansas-Tennessee markets were negatively hit by the storms in Texas last month.
With Texas mills largely out of the market, Arkansas-Tennessee mills were able to pull tons from Texas. St Louis sellers, who also sell into Arkansas-Tennessee, were offered only a $30- to $40-per-ton increase for obsolete material.
“It is kind of a lousy situation. We had pretty good tonnages booked for February, then saw the bitter cold spell shut down our flow. We owe a lot of scrap from February orders and cannot raise our prices to follow March increases until we fill the cheaper orders,” a St Louis seller said.
“These whipsaws are ridiculous. They should have held steady for February instead of pushing the price down, because now they are right back where they started,” the St Louis seller added.
While the jury is still out on where secondary scrap will be headed for April, prime is expected to remain tight through September because automotive production has stalled due to the lack of semiconductor chips.
Chinese chip companies have been overwhelmed making chips to supply laptops for students being homeschooled and a workforce that has moved remote due to the Covid-19 pandemic, according to a seller into the Indiana market. The chip companies will continue to focus on filling backlogs for their computer company businesses, which are a larger client than the automotive industry.
The seller into the Indiana market said that automakers account for only 12% of the chipmakers' overall clientele, so will remain a lesser priority. He does not expect the tight prime market to recover until September.
Fastmarkets’ steel scrap No1 busheling index, delivered Midwest mill was calculated at $551.32 per ton on Wednesday March 10, up by 11.99% from $492.29 per ton in February.
The steel scrap shredded index, delivered Midwest mill was calculated at $444.94 per ton on Wednesday, up by 12.34% from $396.07 per ton last month; and the steel scrap No1 heavy melt index, delivered Midwest mill increased by 14.32% to $421.14 per ton from $368.40 per ton in the same comparison.