ORLANDO, Fla. Midwest ferrous scrap prices shed at least $20 per gross ton across all grades in April as mill buyers fought off dealer resistance amid lower overall demand, improving scrap flows and an apprehensive outlook, pushing down AMMs Midwest Ferrous Scrap Index by about 5 percent, depending on the grade.
Market participants in Detroit were the first to agree to a down-$20 price move for April, setting the tone for St. Louis, Chicago and northwest Indiana, which followed shortly after (amm.com, April 4).
While suppliers in the St. Louis region agreed to a firm $20-per-ton reduction, trades in Chicago and northwest Indiana were reported anywhere between down $20 and down $22 in early trading and as much as down $25 in wrap-up deals towards the end of the trading window, although sources said a majority of the volume traded closer to the down-$20 level set in other Midwest cities.
Demand for scrap from several mills was down anywhere between 10 and 20 percent for April, according to market participants spread across the region, with many citing struggling order books in certain steel sectors for the reduced demand.
Market speculation through the third week of March had signaled weaker scrap price trends for April, with dealers initially indicating they would fight to stop prices from sliding more than $10 per ton below March levels and mill buyers indicating they would push for a $20-per-ton drop (amm.com, March 14).
By the third day of April, however, it became clear that dealers had decided to bow to mill demands after initial resistance was completely shut down by mill buyers. According to one broker, mill buyers refused to cede any ground because the general feeling was dealers won the March round when they sent scrap tags up between $30 and $40 per ton, depending on grade and location (amm.com, March 11).
"Initially, there was lot of back and forth, but by mid-afternoon on April 3 things really started after (dealers) gave in," one mill buyer said. "We have a reasonable inventory position, business conditions are OK, but nobody is setting the world on fire."
One Midwest dealer said that most dealers probably feel prices are not likely to recover in the near term. "I think the reality is they felt that were not going to see a bounce back," he said. "They looked at export numbers, a strengthening dollar and shortening mill lead times, and that realization hit when mills came in at down $20, plus demand was down less in the Midwestdown about 15 percent in Chicago."
A second dealer said price movements over the past few months appear to have been influenced by a lot of rhetoric. "In March, when we were trading, everybody had it in their head that it was going to be up because of all the talk leading into the month. When the markets being talked up, mills get it in their head and then accept it," he said. "But its the same on the way down. People like to say, the markets never wrong; I like to say, Its wrong a lot.
"Last month, it went up too much and the fact is that we accepted it would come back down in April. This is still a pretty healthy price, given business levels. When the export news is as sad as its been, how can you expect to go anywhere but down?" he added.
A third dealer said part of the apprehension in the market stems from a fear that the automotive sector is slipping. Additionally, with better scrap flows in the spring, suppliers need to secure homes for their scrap. "Prices going down over one day of trading from sales at down $20 to some sales at down $25 is an interesting indicator. It tells you mills are getting offered more than they need," he said.
Among the different scrap grades, shredded scrap tags lost a little more ground to No. 1 busheling as the market attempts to restore a full $10 price differential between the two grades.
AMMs Midwest Ferrous Scrap Index for No. 1 busheling settled April 10 at $397.15 per gross ton, down 4.8 percent from $417.26 in March; AMMs Midwest Ferrous Scrap Index for shredded scrap settled at $388.89 per gross ton, down 5.4 percent from $411.17 in the same comparison; and AMMs Midwest Ferrous Scrap Index for No. 1 heavy melt settled at $359.59 per gross ton, down 5.5 percent from $380.69.