Anticipated fragmented scrap pricing next month could bring US regional scrap prices closer together, according to market sources who generally agree on downward pricing pressure for May settlements.
Scrap settlements varied wildly in April, with the Ohio market trading around $425/lt delivered mill for shredded scrap and the Detroit and Chicago markets closer to $400/lt. Market sources indicate that the highest priced regions could face the most downward pressure in May, with dealers in lower-priced regions unwilling to concede even lower pricing.
"The guys who went up more than Detroit will try to retreat a little bit," one Detroit-area dealer said. "We will follow the surrounding markets, but muted. There is flow, but I don't think there is a massive amount of scrap."
US sources do not expect East Coast exporters to play a significant role in the May domestic market. After impacting first quarter scrap negotiations with inland offers, US exporters largely retreated from the domestic market last month.
Turkish mill offer prices for US East Coast scrap have fallen to around $375/mt CFR heavy melting scrap I/II (80:20 blend), down from sale prices earlier this month at $384.50/mt. Some of the price erosion on a CFR basis has to do with freight rates declining from $22-23/mt to $16-18/mt this week.
"I don't think there is going to be an abundance of shred," one East Coast dealer said. "The bulk guys have most of their orders filled for overseas, even if they are off a few bucks, it still means less material in the market. I think the [domestic] market will be flat to down."
Scrap pricing moved up an average of $15/lt from March to April settlements, but the overall market softened as April negotiations dragged on, with some sales concluded at sideways pricing at the end of the buy week.
Sources agreed that flows of cut grades have improved significantly with the improvement of weather in the Midwest and Northeast during April.
"Everybody thinks flow is going to get better and it will, but the cupboards were bare," one Ohio Valley dealer said. "It will take more than 30 days to get the cupboards full again."
Hot-rolled coil prices have trended higher in April, but the push has primarily been driven by supply disruptions. "Not sure I agree scrap should be up just because the hot-roll market," one mill scrap buyer said. "(I) definitely agree order books are stronger, but our view is this is strictly supply sided and not a result of better demand.
"Scrap flows will definitely be better than the previous few months," he added.
The Platts daily assessment for shredded scrap held on Thursday at $395-405/lt delivered Midwest mill.
