Section 232 spooks US ferrous scrap market

The US ferrous scrap market idled into neutral on news that Section 232 tariffs will take effect in the coming week, with buyers holding internal discussions and dealers afraid to sell below fair market price - but roared back to life by end of Friday March 2.

“Mills are extremely nervous and don’t know what to do. I was going to offer to sell shred up $30 a ton, but got nervous they may actually accept the price because I would be selling myself short,” a seller into mills in the Alabama and Arkansas-Tennessee region said.

“This is a month where I would rather follow and get the full increase,” the seller said.

The Detroit market quickly closed on Thursday March 1 before the import tariffs news broke, with sellers agreeing to accept a $20-per-ton increase on cuts and shred and no change from February prices for turnings and prime.

The increase in shred and sideways move on busheling has narrowed the gap between the two grades to $20 per ton, compared with an $80-per-ton spread in July 2017. Shred is selling for $350 per ton, and busheling is trading for $370 per ton.

With prime and shred selling in a close range, there is an expectation that mills will buy more prime, which has a better recovery yield when melted in the furnace. One mill buyer said that the high prices for remote shred has motivated him to purchase more primes.

“I am not going to chase prime, but if I can source it locally, then it makes sense,” the mill buyer said.

Mills were aggressively approaching sellers looking for tons on March 1, but retreated early in the morning on March 2, telling suppliers they would enter on Monday March 5.

Mills then re-emerged after lunch on Friday, and locked up tons from some sellers. 

Early sales into Cleveland have mirrored Detroit – up $20 on secondary grades and sideways on prime scrap – but there is no indication as to where turnings are headed in the region.

In Chicago, it is unclear whether the prime scrap market will have upward potential, because there is plenty of supply and nearby Indiana mills do not have to reach for busheling and bundles. But sellers are balking at a possible sideways scenario, stating that mills need more prime to supplement the lack of availability of shredded scrap.

There is strength emerging for prime scrap along the Mississippi River and into Alabama.

Secondary grades like shredded scrap remain hard to source. Sold-out rebar mills in February absorbed a lot of cuts and shred in a month that is notoriously tight on these grades. Early sales of heavy melt and shredded scrap are selling for a $25-per-ton increase, which is $5 per ton higher than Detroit’s monthly trend. Many sellers are holding out on the strong sense that this market is just heating up.

While the better order books at plate and rebar mills are increasing their scrap demand, flat-rolled mills have been running strong for months and are not buying more than usual.

In Philadelphia, one mill has reached out for material at a $10-per-ton increase on cut grades and a $15-per-ton increase on shredded scrap from February pricing. It is unclear how much traction the mill is receiving, but sources said another Philadelphia producer is offering $5 per ton more than the first mill on these two scrap grades.

“I think we are a solid $20 up market. You can pick off some local tons at a $10-[per-ton increase], but there are many dealers who are probably going to hold out at that price. There are many other places that you can sell into right now,” a Philadelphia dealer said.

Mei Ling Toh, New York, contributed to this article.