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US ferrous scrap prices accelerate their downward trend

US steel consumers will be eagerly awaiting a reduction in surcharges this month as mills prepare to buy scrap at prices that are on average $60/long ton or more below April levels for top grades, based on transactions reported to Platts this week.

It was the second successive month of US scrap price declines following four months of upsurge to record levels in March. Scrap grades across the board are now selling below the $300 mark despite an uptick in export sales recently as Turkish mills came back into the market.

Some US mills had not made purchases yet this month as of mid-day Wednesday, a possible signal that they're trying to negotiate lower prices, or don't need material. Bid prices in the recent DaimlerChrysler factory auto bundle auction were said to be down by $75-80/lt. Some scrap processors said they had been unable to get a firm buy-side quote yet this month.

Processors meanwhile, report scrap inflow to their yards has increased as word got around that prices were falling. "We have the largest inventory we've had in three to five years," said a processor in the Northeast, who only two months ago had been worried about keeping his shredder fully supplied. "I hear about export buying (but) mills aren't competing against export-they're competing against (scrap) inventory levels."

Some processors, and the auto dismantlers they buy from, may have been caught with high-priced inventory. "One guy we buy auto bodies from, when I told him what prices I'm hearing, said he would just call all his flatteners in because he couldn't make money at (current) prices," said a processor in the Midwest. If that happens, he said, he might still have trouble supplying his company's shredder. He admitted however, that his inflows of other types of scrap had increased since mid-April.