The market for February scrap shipments has largely been settled. The prices for scrap across the country went down very modestly. The price tags on #1 Busheling and bundles went down $10 per gross ton (gt) in most districts. The exceptions were Chicago and Detroit, which fell $30/gt, to $480 and $475, respectively.
It should be noted mills in these two districts paid more than their official prices last month for these grades. So, we really can’t determine what the actual decline in price was.
Shredded scrap largely went sideways, except for a couple of districts that dropped only $10/gt.
At the end of January, several mills decided to cancel all undelivered orders, except for shredded scrap. With the extreme cold and blizzard conditions in mid-January, many dealers could not ship scrap in any normal way. So, they really did not have the time to complete their orders. This did not matter to most mills as they saw an opportunity to take advantage of the weather conditions, which impeded the flow of scrap. Was it really worth it to save a few dollars on the backs of their regular suppliers?
In the scrap business, the purchaser of scrap has the right to cancel undelivered orders after 30 days. This has been a contentious point between the mills and their suppliers. Not all mills adhere to this, however. Some buyers will give their suppliers extra time to ship as long as they believe the supplier is making a good faith effort to complete the order. Clearly, last month’s situation should have qualified for this consideration. But, this is the way things have evolved in the scrap business today.
Looking ahead to the spring months, the mills can expect a larger flow of scrap as the weather improves. This naturally brings down prices. So, there was little pressure to force things down a mere $10/gt when a larger drop was inevitable in another month. It just causes bad blood, which has affected these relationships for years.
Stephen MillerRead more from Stephen Miller
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