US ferrous scrap market regions slowly taking shape

The US domestic ferrous scrap trade has kicked off with higher offers across the board, but market participants indicated that negotiations have turned rocky in some regions, with some sellers holding out for bigger increases

In the Midwest, some sellers into Chicago, Cincinnati and Detroit have embraced producers’ offers to buy No1 busheling at a $30 per gross ton increase, and shredded scrap, plate and structural scrap and machine shop turnings at a $20 per ton increase compared with November.

At the same time, other Midwest sellers are holding out for higher offers or are willing to hold out for January, which they expect will be up another $20-30 per ton.

“I am not too excited about being offered up $20 per ton and $30 per ton when I hear better deals are being cut. The sentiment has changed. I am not excited to sell because I think there is another $20 per ton and $30 per ton [increase] in January, which is a reason to hold out,” a seller into Cincinnati and Indiana mills said.

In Alabama and Arkansas-Tennessee, mills entered the market with offers to the Midwest, which included a $20 per ton increase on shredded scrap. Shredded sales quickly increased to up $30 per ton, with sellers reporting that mills are competing with each other for material. Domestic mills also have to compete with a hot export market for available tons.

Some Midwest sellers are willing to accept the higher prices because they don’t have the transportation infrastructure to wait to ship extra tons in January. Another seller into Detroit said he is willing to ship material on concerns that too much scrap will come into the market in January.

The Philadelphia market followed Detroit’s trend and settled up $20 per ton on cut grades and shredded scrap and up $30 per ton on prime grades on Wednesday December 7.

“December is always very thinly traded,” a seller into the Philadelphia region said. “It’s been a boring month and that’s kind of nice,” he added, following the turbulence in prior months.

Local mills in the Philadelphia region were allegedly struggling to fulfil their inventory requirements locally this month, so securing a $20-30 per ton increase on November’s pricing was fairly swift, one seller said.

“Export [market] is strong and I don’t see it showing any weakness. Mills may be paying $20-30 per ton more in January. Primes may even hit up $40 per ton,” the seller said.

Indeed, a strong uptick in deep-sea ferrous export prices has been a boon for domestic sellers with export opportunities, who are broadly capitalizing on the $20 per ton increase on cut grades and shredded scrap and the $30 per ton rise on prime grades in December versus November.

Rising exports are influencing price trends in other markets with coastal proximity, fueling some sellers’ beliefs that markets in the Southeast will have better-than-anticipated increases over the period.

In Houston, regional mills had been angling for a sideways market this month, but remote sales have started to trickle in at a $20 per ton increase on cuts and shredded for some. However, the market has not fully formed and this may force local mills to compete by raising offers. Mills remained steadfast on Wednesday, continuing to fight for a second consecutive month of sideways prices.

Sales in the Carolinas are gaining traction at up $20 per ton on cut grades and shredded scrap and up $30 per ton on prime grades in line with Detroit’s initial trend, with participants expecting that the market will soon settle on that basis.

“Some brokers think the market should have been higher due to exports, but December is a ‘weird’ month with outages and it’s usually quiet so I felt blessed to just get up $20-30 per ton. But there is more [upside] to come in January,” a Carolinas seller said.

In Cleveland, ferrous scrap is transacting at up $30 per ton for prime grades and up $20 per ton for cut grades and shredded scrap. The increase comes despite limited demand in the region. Two mills in the Cleveland market had unplanned outages or other downtimes and adjusted their buying programs accordingly.

The Pittsburgh market has been slow to start. Buyers and sellers have suggested that scrap will go up $30 per ton on prime grades and up $20 per ton on cut grade and shredded scrap, but sources said the actual buying and selling has yet to begin.

The slow start has created some skeptics. “If [the increases] were so easy, it would have happened by now,” one seller into the market said.

“I see a lot more demand, but I don’t see any more scrap,” the seller said, adding that consumers may need to raise prices, particularly for cut grades and shredded scrap, to attract the tons they need. Multiple sources told Fastmarkets that demand in Pittsburgh is higher month on month, due to a significantly larger purchase from one mill in the region.

Another market source also said that disagreements around prices for plate and structural scrap “could be a part of the hold up.”

Not all participants were convinced the slow start was related to prices. “At this point, it’s not going to be any less than up $20 per ton and $30 per ton,” another seller into the market said, “but I’d be surprised if it were more than that as well.”

Amy Hinton in Pittsburgh and Arthur Robert in Boston contributed to this report.

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