Miller on scrap: What a mess!

Written by Stephen Miller

For two consecutive months, the initial scrap prices didn’t attract the amount of scrap that mills needed. A Detroit area mill came in at $460 per gross ton (gt) for busheling, which was down $50 from last month, and down $20 on shredded and plate and structurals (P&S). But I guess they did not know at the time another mill in the district bought scrap sideways. Needless to say, that order filled right away. SMU could not find any supplier who sold at down $50.

SMU spoke with sources in that region about what busheling prices are currently. One source reported deals on tonnages of busheling were being concluded at a price “significantly higher than $510/gt,” which was the price paid in December after similar wrangling over the initial bids.

The scrap market is still in flux, with prices diverging across various regions. Another source said there are major mills in the Northern districts still looking for busheling. Their official price is at down $30/gt, but it’s unlikely they will attract any at that price. Obviously, they’ll have to ante up.

What is most disturbing about this whole episode is that we have scrap buyers who put out prices to the trade and then cut deals at different prices. The publications who set the prices used in formula pricing for industrial scrap and steel mill scrap surcharges are trying to determine at what the actual price scrap is being traded. But with all the smokescreens, it’s not an easy task. The main published prices came out sideways despite pressure to lower them. Now, busheling is selling above these sideways prices, so the published prices are still not accurate.

So, who is better off now? Certainly not the mills. The dealers who resisted are, but the ones who did sell at down numbers are not. How about sellers of industrial scrap governed by formula pricing? They were helped by the publications reporting sideways pricing, instead of weaker, but now the actual price tags are higher. So, let’s say they broke even.

Maybe this whole system needs to be reviewed because there is too much subjective input in determining the true price of scrap in a given month.

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