NEW YORK Midwest ferrous
scrap trading kicked off in earnest May 2 in such key regions
as Chicago and St. Louis, with prices closely following
downward trends established a day earlier in nearby
Market participants across
Illinois, Indiana and Missouri said several dealers willingly
accepted a price drop of $20 per ton across several grades,
with shredded sales likely to shed even more ground when the
dust has settled.
An earlier expectation by a few
players that prime grades would not drop as much as obsoletes
and shred due to a rumored supply tightness has not held true
in early sales, according to several sources, with some noting
that shred appears poised to drop more than primes only because
of better shred supply, not lower prime supply.
"It seems like most sellers are
willing to do down $20 today without much discussion. I could
see our market settling by tomorrow unless some of the
consumers try to push it down further. Were seeing a bit
of an overhang in shred tons. ... As far as primes potentially
being tight, I dont believe we have seen that, and all
the deals Ive heard have been down across the board,"
said a source at one large Midwest steel producer.
At least three producers in the
Midwest region have reportedly completed their buying programs
at anywhere between down $15 and $22 per ton from Aprils
levels depending on grade, with the remaining producers
expected to conclude trading by May 3.
"Down $20 seems to be pretty
much where things are going to trade in all markets," said a
buyer for a second producer, while a third buyer said the
Chicago market was caught off guard by the surprise early entry
of one mill on May 1.
"(One mill) entered yesterday,
which caught myself and other buyers here off guard. There was
no reason to act hastily since suppliers and mills are on the
same page with pricing, given the deteriorating conditions," he
Many dealers and brokers were
also surprised by the early shakeout to Mays scrap
"I am pleasantly surprised,"
said one seller for a large Chicago-area dealer. "The fact that
it happened quickly indicates perhaps theres some sanity
out there since mills are tempering taking it down too much
because they know the impact it has on their sales prices."
Sources said two large market
makers were taking their time to complete their buying programs
in the hopes of securing larger price drops, but many dealers
said that they would not accept drops of more than $20 per
Further east, one mill in
Cleveland settled at down $20 across the board, with other
mills still trying to fill their needs. It is unclear whether
mill buyers were spooked by the fast pace of the market, but
some undisclosed factors have managed to stall the dealmaking,
Sources indicate Pittsburgh will
consume three times as much prime scrap this month as it did in
April, and No. 1 busheling prices looked poised to drop only
$10 a ton as a result. Shredded scrap is plentiful and is
expected to retreat by more than $20 a ton, sources said.
Cincinnati also appears to be on
course to settle at down $20, with mills closely watching their
order books. "No one is taking a big position because they
dont want to be caught with a lot of scrap as business is
not robust," a Cincinnati mill buyer said.
Mills in Birmingham, Ala., were
still finishing their buys May 2, but it appeared the market
will largely follow Midwest trends. After successfully securing
enough scrap at a $20 discount, mills were trying to pick up
tons at even better prices, according to sources who also said
mills are not taking big inventory positions.
Lisa Gordon, Pittsburgh,
contributed to this story.