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According to just-published data from American Metal Market (AMM),  February shredded scrap (obsolete) and #1 busheling (prime) scrap prices fell a greater-than-expected $30 and $45/ton (or 6.4% and 8.7%) to $440/ton and $475/ton, giving back a large chunk of the $60/ton and $70/ton gains seen the over last two months.

The $30 ton decline in shredded most probably is due to reduced overseas demand from Turkey who was largely out of the market in the month – or purchasing from Europe – and several Asian countries who were celebrating the Lunar New Year holidays.  We suspect the much-larger-than-expected $45/ton drop in prime scrap grades is likely the result of at least one major domestic steelmaker making opportunistic foreign purchases of pig iron for February arrival – and thus reducing the mill’s appetite for prime scrap – and  stronger than expected factory activity, which generates more prime scrap.

Globally lowered steel production and milder US weather contributed to weakness in all types of scrap this month, as balmy and dry conditions facilitate increased scrap flows.  February scrap may have been hit with a double-whammy, as forecasters had been calling for a difficult winter, so mills most probably bought more material ahead of time.

Our full report provides our scrap and steel price outlook as well as the implications for steel equities.

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