Ferrous scrap prices have sagged between $20 and $30 per long ton this month, less than some had expected following a fierce snowstorm that buried much of the Midwest.
Shredded scrap in key markets like Cleveland, Pittsburgh and Birmingham was down an average of about $25 per ton. Industry sources said the absence of enough feedstock for shredders, and the likelihood that the blizzard would cut supplies even further, prompted some buyers to rethink their plans.
Shredded seemed to become the benchmark for price declines for other grades of cut ferrous scrap, like No. 1 heavy metal and plate and structural scrap, in many of the largest steelmaking cities. The lone exception was Detroit, where Severstal North America Inc. and U.S. Steel Corp.'s Ecorse Works cut their scrap intake sharply this month. Prices decreases in Detroit matched the $25-per-ton cuts seen elsewhere, except for offers for No. 1 dealer bundles, which sagged $30 because of the integrated steelmakers' absence from the market.
The market was slow to develop in Chicago, which was among the worst hit by last week's blizzard. Most scrapyards and brokers, as well as mills, were shut Tuesday and Wednesday, putting pressure on buyers and sellers to get deals done by week's end at the latest. Prices for both the obsolete and prime grades were off only $15 per ton on average, although some mills were claiming they had pushed prices down as much as $25 or $30 per ton. Dealers in the region, on the other hand, said they were accepting $5- to $10-per-ton price cuts and were looking to hold scrap for March.
Two major suppliers said they had accepted price cuts of $10 to $15 per ton on heavy melt and shredded, but a little more than that for prime grades like No. 1 bundles and No. 1 busheling.
"Looking at our inventory, I figure we may have as little as 9,000 tons by month's end," said a trader at one major scrapyard in the region. "If that's the case, I will be a buyer next month and not a seller."
A Chicago-based broker said that while February was already a short month, the heavy snowfall would make it even shorter because many dealers will have to wait longer to get rail cars, delaying deliveries to the mills.
One indication that some mills are concerned about supply was word that many buyers normally quick to cancel existing orders at month's end, when they see prices declining for the following month, were holding back on that action, he said. "I think this is the month where they may have realized it's not time to get cute."
With the market slow to solidify, the direction for March remains unknown, a Midwest scrap seller said. "Up until the last minute, some dealers thought it was sideways. I started to get nervous mid-month, and I think there were others in the same boat. They just didn't think that everybody else could be wrong. This should make March much more interesting."
If prices were to slip again in March, there's a good chance that scrapyards will move to the sidelines and build inventory. "Prices have pretty much settled down $25 a gross ton across the board. Dealers are disgusted. Some are already calling for an up market in March, and I believe they will try to flex their muscles if it happens," the Midwest seller said.
He pointed out that steel producers had been raising prices for their finished products based on anticipated scrap increases in February. "People are watching what happens. Every customer and purchasing agent will be hammering on this point now that scrap has gone down," he said.
One Midwest mill buyer is out of the market completely at the moment as he expects further weakening in March prices.
Activity has been quiet in Canada. "Obsolete scrap flow is very tight, seemingly because of the weather. Mills have lots of scrap on the ground because they ordered more than necessary in advance of December and January to protect against tons not flowing due to weather. Coincidentally, yards had plenty of inventory so flow wasn't an issue," said a dealer who sells to Canadian mills.
"Mills are running very strong and they'll need a continued flow. They bought less this month to eat into their inventory but will resume normal ordering for March," he said. "If prices do anything other than strengthen, scrap will tighten up too much, and that's not something mills can risk."
On the East Coast, a handful of veteran players were unanimous in saying they don't know where the market is headed.
"The people that I talk to throughout the industry are split on the March market. I can tell you this, price drops and bad weather will slow up inbound. Right now, my crystal ball in foggy," one source said.
"March is really hard to call at this time. The Turks have moved away from the offshore market and really they do not know what to do. One thing for sure is they need to buy, and need to buy soon," he said. "The crisis in Egypt has them very concerned and they are all looking at each other to see who will pull the trigger first. On the domestic side, we have a real paradox. The weather has been bad in many parts of the country and historically this causes prices to rise."
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