The US ferrous scrap market started to lose momentum on Wednesday, despite bullish expectations from suppliers last week.
Mills delayed their entrance into the market, taking a disciplined approach and reducing their planned buying programs as the availability of scrap for September shipments was higher than initially expected.
"Lots of incremental tons are now being offered around and seemingly every mill is reassessing their [scrap buying] programs," one mill buyer said. "The hype is coming out of the market."
Outages and reduced buying programs at mills were reported around the country, primarily in the Midwest.
"Based on my travels in August, I was highly suspect of up $30 [talk]," one Midwest supplier said. "I was just seeing a lot of scrap flowing and saw strong inventories at [local mills]. Shred is very abundant, as it should be when pricing is $200 a net ton and higher to the shredders. Nearly every mill reduced my program by something, some dramatically. There are many outages by mills that have been running hard for months."
Just last week it was dealers resisting entering the market, even as some mills offered up $20/lt. On Wednesday it was the mills content to wait on the sidelines showing no rush to enter the market. Most agreed that a bulk of trading activity will occur on Thursday.
"It is dead quiet, and the longer mills can hold out, I think the more desperate sellers will get," a scrap dealer said. "[Talk of only] up $10 will most certainly push trading to tomorrow at the earliest."
Reduced buying programs at mills are being met by the steady increase in scrap flows into dealer yards. One scrap dealer reported a 30% increase in scrap flows from July to August. Scrap prices increased during the July and August buy weeks.
"There very well could be a glut of shred about to come," the dealer said. "The momentum has flipped as consumers continue to wait this out."
One major mill group was giving early indications on Wednesday of up $10-$15/lt on obsolete grades and up $20/lt on primes.
"The steam is coming out," another Midwest supplier said. "Mills are going short, hoping that there will be a glut of shredded scrap. We will be aggressive sellers of scrap. Prime will be easy to sell. HMS and P&S may be tougher."
Based off bids, offers and sentiment S&P Global Platts lowered its daily shredded scrap assessment to $320-$335/lt delivered Midwest mill, down $5 on day but up $15/lt from early August.
Suppliers around the ISRI Roundtables Forum in Chicago this week were surprised as sentiment eroded over the Labor Day weekend. Talk of possible sideways pricing for the first time in September discussions from multiple sources. Other dealers were not ready to concede their initial expectations yet.
"We'll see what happens when the mills actually start to buy," one scrap supplier said. "Down south the expectation is more money. If mills come out at up $10-$15 down there, dealers will back off what [tons] they commit."
Southern markets remain stronger based off better mill demand, and prime scrap is still expected to more sought after due somewhat to Nucor's continued DRI outage in Louisiana. There is still some uncertainty around Houston and river markets that pull scrap out of Houston due to the impact of Hurricane Harvey.
"I think shred and cuts could possibly be sideways before it is all over," one buyer for a southern mill said. "Primes might be up. If not for Harvey, this market likely would be down. It's lost lots of momentum."
A supplier in the south said that up $20 was still in discussion late Wednesday and that some prime talks continued at up $30 around Birmingham.
"The South is stronger than the Midwest," he said. "We will see what tomorrow brings."
