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Separation between primes and shred puzzles many

By Bill Beck - April 24, 2017

The growing separation between prime grades – particularly mill busheling – and shredded in most North American markets has brokers, dealers and buyers puzzled, if not a little concerned.



Industry Survey of Factors Affecting the Upcoming Market

Imagine having advanced notice of what your allies, competitors, peers and clients are thinking about what's to come in each new monthly scrap market. Scrap Trends Outlook, delivers an exclusive look at where prices, supplies, demand and other factors may be heading. Each month, Scrap Trends Outlook gives you a chance to listen in on the emerging industry conversation about the upcoming scrap market and provides a comprehensive tool for buyers and sellers to gaze into an industry consensus of where the price and availability of scrap may be heading.

Numbers and Letters

A quick look at key points expected to affect next month's markets

2

The number of years that scrap prices have risen across the board in a May market during the past decade. Prices have fallen four times, been sideways once and have seen mixed results in three other years. This makes May a unique month in that no clear direction can be gleaned from historical numbers. Past changes suggest a toss up.

52

The Scrap Trends Outlook trend number for mill factors, which include perceived demand, orders, production, inventory, home/captive scrap and slowdowns. This means that the market believes mills and foundries will be at or slightly above their performance from April, which could keep prices from falling and may help push scrap values upward.

94

The percentage of respondents to this month’s survey who expect May prices to be sideways or up. Only six percent say a decrease is possible. However, a majority – 60 percent – are looking for no change at all. But the remaining 34 percent who say increases are coming tilt the overall trend forecast slightly toward a more bullish market next month.

Our Methodology

Scrap Trends Outlook Methodology: A numerical value is given to the overall trend for the upcoming month after all the survey results of a series of 15 indexes are calculated based on a weighted average. A number close to 50 will give a ‘sideways’ or ‘unchanged’ reading, while numbers above 50 will give a reading for a bullish trend. The closer to 100, the more likely it is that prices will trend upward. Conversely, a number below 50 will give a reading for a bearish trend. The closer to 0, the more likely it is that prices will trend downward. N/A means there were too few survey responses to publish a reliable figure.

Taking Account

A look at how Scrap Trends Outlook Index numbers for April stacked up against actual changes in last month's market.

Prime Grades

April Review
April Review
April outlook:
Bearish (48.7)
April's actual change:
Busheling: - $8/2% 
Bundles: - $8/2% 

Cut Grades

April Review
April Review
April outlook:
Bearish (47.2)
April's actual change:
No. 1 HM: - $30/10% 
P&S: - $25/8% 

Frag Grades

April Review
April Review
April outlook:
Bearish (43.2)
April's actual change:
Shred: - $21/9% 
 

Foundry Grades

April Review
April Review
April outlook:
Bearish (47.8)
April's actual change:
Punchings: - $18/3% 
Misc. Foundry: - $12/3% 

10 Things to Watch

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1.
If upward pricing momentum returns, it could continue for a few weeks, pulling levels up longer term
 
2.
Supply has yet to catch up with mill demand
 
3.
Mill capacity rates are mixed, but right now are over 75%
 
4.
Historically, May is more likely to be a weaker month




 
5.
Due to lack of industrials, supply of scrap is tight
6.
Brokers could help keep prices high if they continue to seek more material for exports and mill customers
 
7.
Home and captive scrap will likely remain stable
 
8.
Improving weather could free up some transportation
 
9.
Exports are expected to regain some strength in May
 
10.
Supply, demand balance could keep prices sideways

Notable Quotes about Next Month

" Should not have had cuts go down so far (in April). Demand good and not a lot of inventory in dealer yards."
" Lower sales in April due to reduced price and dealers holding back."
" Cut grades will have to adjust up a bit. Sold too cheap in April."
" Market seems to be in a state of equilibrium."
" Mills are starting to fall behind on orders."
" Busheling may tighten–seasonal influences."