Detroit mills bid down for primes, hold obsoletes

Detroit mills kicked off trading for February ferrous scrap deliveries this afternoon by bidding down by $20/gt for prime grades and agreeing to leave prices unchanged for shredded, cut grades and turnings.

Dealers were not resisting the widely expected price moves by the region's largest consumers, which come a week after extreme cold shuttered yards and nearly halted obsolete scrap flows across the upper midwest.

A surging export market also bolstered shredded and cut grades. The Turkish market climbed by $30/t to around $315/t cfr on an HMS 1/2 (80:20) basis in just the last two weeks as mills purchased more than 300,000t from the US out of more than 800,000t booked globally.

But a healthier supply of prime grades was weighed down by a narrow spread with higher-yielding pig iron and hot-rolled coil (HRC) prices that ended January down by more than $50/st as buyers continued to limit purchases as prices fell.

"It is cheaper for us to melt pig iron than prime scrap, because we can blend in more obsolete grades," a mill buyer told Argus last month.

Pig iron fell by $25/t through January to around $345-350/t cfr New Orleans last week, in line with around $350-355/gt delivered-mill for #1 busheling in Detroit following today's drop.

The prime move also helped flat-rolled producers maintain the spread between HRC and #1 busheling prices above $400/gt after it fell from more than $600/gt in July as the former retreated from a 10-year high. The long-run average spread prior to the 2018 run-up in HRC prices is around $335/gt.

Major producers like Nucor and US Steel last week announced $40/st increases in offer prices for HRC designed to establish a long-sought floor under the market, which many suggest will help keep scrap prices stable in coming months.

Machine shop turnings prices held after dropping by $40/gt in the region in January amid a healthy supply of higher-yielding grades.

Remaining markets across the midwest and south are expected to follow similar trends as they trade out through the week.