A Look at Midwest Scrap Pricing for September

Scrap prices surprised scrap dealers and have deteriorated more than what was expected going into September negotiations with the domestic steel mills. Here is how one of the national scrap companies portrayed the tone of the negotiations:

“As you can imagine, it’s been a hectic time since the return from the holiday last week.  As you’re aware, scrap prices deteriorated further than anticipated for September.  Mill demand was weaker than expected as order books continued to contract.  This left mills with greater raw materials inventories than planned, thus limiting buys for September.  Interestingly, despite another downturn in scrap pricing, flows have remained fairly steady as market participants see the steel price declines putting additional downward pressure on scrap prices heading into October.  However, we’ll likely see the traditional seasonal trends coupled with reasonable export demand potentially balancing supply/demand beyond October, leaving scrap somewhat range-bound through year-end barring any significant recovery in mill operating rates.  Looks a lot like the Q4 scenarios we’ve seen during the past few years.”

Our sources have pegged the average for ferrous scrap prices in the Midwest markets as follows:

#1 Heavy Melt (HMS) = $210 per gross ton.

Shredded scrap = $220 per gross ton.

#1 Busheling scrap = $235 per gross ton.

One of our sources provided more detail regarding transactions out of specific mills:

“Shredded is $220 per ton in most regions.  Some mills in Nothern Ohio are paying $225 per ton. The price on busheling ranges from $230 to about $255 per ton.  Highest is a mill located in central Indiana at $255,  But that includes added costs for trans-loading and rail delivery as well as a modest premium of about $5 per ton over what some dealers get shipping to another mill located in Northern Ohio.  Two mills located in Northern Ohio are paying $240 per ton for busheling. So $235 is a midpoint if you exclude the extra freight expense to the central Indiana mill.  A mill located in Northern Indiana is the main busheling buyer in the Chicago area and paid $235 per ton this month. Heavy melt ranges from $190 per ton Ohio (near Cleveland), but that’s a lower quality heavy melt.  They call it No. 2 HMS extra dense.  Mills in Detroit are paying $210 per ton and the average price in Chicago is $208 per ton for No. 1 HMS.”