US mills began sending cancellation notices to their ferrous scrap suppliers for any material not delivered by close of business Wednesday, the last business day of the month.
Some mills canceled only undelivered prime scrap, the grade expected to see the biggest price drop in September, while other mills canceled all grades.
"No surprise on the cancellations coming in," one source said. "[The] market is weaker, which means cancellations are sure to come. Demand is much weaker."
A major electric arc furnace in Ohio was canceling all grades, two Detroit-area EAFs were canceling only prime grades of scrap, and other Midwest mills were canceling most grades with some mill-specific exceptions, including heavy melting scrap or plate & structural scrap exclusions.
September trading is expected to begin on Tuesday at the earliest following the US Labor Day holiday on Monday.
One major mill was indicating to dealers on Thursday it was likely to take primes down $20/lt and obsolete grades of scrap down $10/lt during the September buy week.
"People have given up on busheling; shred will take a hit because the powerhouse shredders have plenty of shred to offer into the market," one trader said. "The fight will be on cut grades."
Mill outages and poor utilization rates are the two major factors weighing on the market. Mill buyers indicate they are not in a hurry to procure tonnage and will likely wait until Wednesday of next week to enter the market.
"Cuts will be tough to figure out," one Midwest mill buyer said of grades including P&S and HMS. "For most [mills] you can fill in with shred if you can or pay [extra] for remote P&S/HMS."
Prime scrap prices are averaging around a $30/lt premium to shredded scrap, a wide premium that many believe still needs to be reconciled.
One Southeast scrap supplier who had yet to receive a cancellation notice by late Wednesday believed most of the cancellations in the Southeast would be limited to prime scrap.
"Cut scrap seems a bit tight and should trade at sideways in most regions," he said. "Shred looks to be a soft sideways to possibly down $5-$10 depending on region. I would expect prime to be down $10-$20."
